Finance Bill, 1998: Committee Stage (Resumed)
I welcome the Minister and his officials to the Select Committee. We resume the debate on the Finance Bill, 1998, Chapters 1 and 2, Part 2, sections 60 to 84.
I wish to bring to the attention of Members the following typographical errors in the list of amendments to the Finance Bill, 1998:
Amendment No. 107 should substitute the word "deduced" and not the word "deduce".
Amendments Nos. 133-136 are addressed to Part 6 of the Bill. As these refer to capital acquisition tax they are properly related to Part 5 of the Bill. Accordingly, these amendments will be taken during consideration of Part 5.
Amendment No. 100 not moved.
Sections 60 and 61 agreed to.
SECTION 62
Question proposed: "That section 62 stand part of the Bill."
This section deals with a relatively small decrease in VRT. Why is it necessary?
My predecessor extended the car scrappage scheme to December 21 1997. I confirmed my intention to end the scheme in October 1997. Subsequently, the Society of the Irish Motor Industry put it to me that, having abolished the scrappage scheme, I might reduce VRT somewhat. The reduction is small but it is a gesture to the motor trade to offset the abolition of the scrappage scheme. The society wanted the rate reduced to 20 per cent. This section reduces the rate of VRT in category A vehicles from 29.25 per cent to 28 per cent in respect of vehicles with an engine of a cylinder capacity exceeding 2,500cc and from 23.2 per cent to 22.5 per cent in respect of vehicles with engines of a capacity up to and including 2,500cc. Both rate reductions came into effect provisionally on January 1 1998 by way of the financial resolution of December 3, and are now being given permanent effect.
I ask the question because it appears that the rate of VRT is not dissuading people from buying cars.
It may be too early to make long-term judgments on this matter but more than 130,000 new cars were purchased in 1997. This was way above our best estimate at the start of the year and even the best estimate of SIMI throughout the year. It was extraordinary. The projection for 1998 was that there would be a slow down in car sales but that is not the indication from the first two months. I doubt there will be the same upsurge in car sales in the last quarter of this year as there was at the end of 1997. As confirmation of the end of scrappage deal inspired many people to buy new cars. However, the sales in the first two months of this year are up on the first two months of 1997.
It would be interesting if the Minister outlined his judgment on the scrappage scheme. Did it take a significant number of old cars off the road?
Yes. I do not have full details to hand, but I gave information on this matter in reply to a recent parliamentary question. The VRT refund scrappage scheme was introduced with effect from 1 July 1995 and was originally due to end on 31 December 1996. However, the scheme was extended for a further year by my predecessor until 31 December 1997 to enable car owners to clear the decks in advance of the proposed introduction of mandatory car testing in 1998. By the end of 1997 close to 61,000 vehicles had been scrapped since the introduction of the scheme with approximately 36,000 vehicles scrapped in 1997 alone. The take up of the scheme surpassed original expectations and is considered to have been very successful in removing from the roads a large number of older and less efficient vehicles and, in the process contributing to increased new car sales.
With regard to yesterday's debate about traffic in Dublin, during discussions with my officials about VRT and the scrappage scheme in the lead up to the budget, I was under the impression that there was a high rate of car ownership in Ireland. However, I was amazed to discover that there is a low rate of car ownership in comparison to our near neighbour, the UK, and that it is less than the European average by a considerable amount. This is good news for the Exchequer in terms of extra revenue in the buoyant economy, but it is bad news in terms of traffic congestion in major centres. Ireland has approximately 27 cars per hundred population while Germany has approximately 50 cars per hundred of population. The rate in the United Kingdom is approximately 40 cars per hundred population so Ireland is well below the European average. This was news to me.
Is it possible to state whether the huge increase in the purchase of new cars is broadening the base of car ownership or is it a case of people who already have cars buying new ones? Are figures available on this aspect?
We do not have figures on that but it would be an interesting study for an organisation or perhaps the motor industry. The Department has no details on that aspect and my knowledge of it is anecdotal. I am sure somebody will produce a study on it shortly.
Prior to the budget I spoke with SIMI at a presentation in my constituency. I raised that issue with it and senior personnel in SIMI said its long-term target is to increase the level of car ownership to 36 cars per hundred population. The UK rate is 42 cars per hundred population and it is much higher in Europe. One of the reasons for this is that Ireland has a younger population in terms of car ownership. As a result, even with the current buoyancy in the economy, it will be many years before the rate is increased to 36 cars per hundred population, which is the target SIMI wants to achieve. If members are interested, the SIMI has carried out research on this topic.
Question put and agreed to.
Sections 63 to 65, inclusive, agreed to.
SECTION 66.
Question proposed: "That section 66 stand part of the Bill."
Will the Minister give the committee the benefit of his wisdom on the purpose of this section? It relates to the valuation requirement for on-licence wine premises.
This section amends sections 8 and 13 of the Refreshment Houses (Ireland) Act, 1860, which dealt with the issue of wine on-licences. The purpose of the section is to update and simplify the application procedure for the issue of wine on-licences by the deletion of the current minimum rate of valuation requirements for the issue of such licences. Section 8 of the 1860 Act specifies the minimum rate of valuation levels required before a wine on-licence can be issued in respect of a particular premises. Where the population of an area is less than 10,000, as recorded in the most recent census, the minimum rate of valuation requirement is £8. Where the population is 10,000 or more, the required minimum rate of valuation is £15. Paragraph (a) amends section 8 of the 1860 Act to remove completely these rate of valuation requirements. Paragraph (b) makes a consequential technical amendment to section 30 of the 1860 Act. The section has effect from the date of the passing of the Act.
It was put to me during the formulation of the Finance Bill that this provision will overcome a problem on the islands. The issue arose when an applicant for a wine retailers on-licence was refused in the case of a resident of one of the western islands as the rate of valuation was below the minimum valuation required under section 8 of the Refreshment Houses (Ireland) Act, 1860. Representations were made concerning the matter and it was the subject of a parliamentary question on 8 October 1997. When the case was examined it was found that the problem related to the valuation of the premises rather than the legislation. Nevertheless, when the wider issue of rate of valuation was considered in conjunction with the Department of Justice, Equality and Law Reform, and the Revenue solicitor, the conclusion reached was that the valuation requirement was an anachronism from the last century and had little relevance today in the case of wine on-licences. Some wonderful information comes to the Minister for Finance during the preparation of the Finance Bill.
I am tempted to use the section as a Trojan horse to debate the issue of the regulation of licences.
It would be a most interesting debate.
I am interested that it appears as a provision in the Finance Bill. Deputy Rabbitte and I have tried to get the Department of Justice, Equality and Law Reform to consider the issue of liquor on-licences and off-licences. We have not succeeded to date so perhaps we should direct our attention to the Minister for Finance and try to have it included in next year's Finance Bill.
Given my experience with the vintners' association recently, I do not intend to pursue the matter. I suggest the Deputy direct his representations to the Minister for Justice, Equality and Law Reform.
Will the Minster have a word with him about the publicans in advance?
Following my experience of not consulting Deputy Rabbitte on credit unions - he also had some dealings with the vintners - I suggest Members consult him as his voice is not taken lightly on these matters.
Question put and agreed to.
SECTION 67.
Amendments Nos. 101, 102 and 103 are related and may be discussed together by agreement.
I move amendment No. 101:
In page 85, line 20, after "amended" to insert "as on and from the 1st day of April, 1999,".
The purpose of amendment No. 101 is to delay the coming into effect of the changes being made by section 67 as initiated. Deputies will recall that section 67 amended section 21 of the Betting Act, 1931, which deals with the hours of business of registered bookmakers premises. The proposal was that, with effect from the date of the passing of the Act, bookmakers premises would be allowed to remain open from 7 a.m. until 10 p.m. from April to August inclusive and from 7 a.m. until 6.30 p.m. from September to March inclusive. These opening hours would also apply to Sundays. However, the current restrictions on opening on Christmas Day, Good Friday and Easter Sunday were to continue.
A number of Members on both sides of the House expressed concern about the ramifications of this proposal. In particular, Deputies Noonan, Power, Lenihan, Carey, Ring and others expressed their concerns about the need for consultation with staff who must cover the extra hours. I also received representations directly from staff employed in betting shops as well as from other members of the public. In addition, I have met representatives of the various bookmakers' representative bodies, some of which, in welcoming this proposal, have requested that its implementation be deferred until April 1999. In response to these concerns and to the concerns expressed by Deputies, this amendment proposes to defer the implementation of the extended opening hours until 1 April 1999.
I appreciate an extension of opening hours will not appeal to all sides, no more than any extension of trading hours in any other Irish service sector. Nevertheless, having met with the various representative bodies and having considered all the implications, I am satisfied that a substantial demand now exists for the change. After all, Deputies will appreciate that there has been no change in the statutory opening hours of betting shops for 67 years and it is recognised by all that major changes have taken place in the industry during this period. For example, there is now Sunday racing and many evening meetings during the summer.
Our legislation cannot be seen as curbing the ability of the trade to expand and develop. It must keep in line with ongoing developments in the trade as failure to do so could drive business underground with consequential loss of tax revenues, both directly and indirectly. In proposing this change, I am conscious of the fact that the law as it stood did not cater for what is currently happening in the trade, and my discussions with the various parties have reinforced this view.
The amendment should give the necessary time to facilitate preparations for the implementation of the measure by those businesses which intend to extend their opening hours. Deputies should remember that this is an enabling provision giving bookmakers the opportunity to regulate their opening hours according to demand. Not all bookmakers will choose to avail of the extended hours, whether at all or even on a regular basis. It is worth noting, for example, that in the UK, where similar opening hours apply, bookmakers' shops often open beyond "normal" working hours only when the demand arises, namely, where a quality horse race or some other significant sporting event takes place.
All parties recognise the developing environment in which betting takes place. However, not all parties agree about the changes necessary to keep up with these developments. On the one hand, the Allied Betting Shops Association, in welcoming the proposal, has pointed out that up to 700 new part-time jobs will be created in the industry by the extended opening hours. On the other hand, the Irish Independent Betting Offices Association has opposed the proposal, possibly because of the inconvenience they feel the new opening hours may cause them or, perhaps, because they feel threatened that any extension of opening hours may put them at a relative commercial disadvantage. Either way, it is not possible to arrive at a consensus view within the industry of what will benefit all its members. Accordingly, while conscious of the concerns that have been expressed by some within the industry, I feel on balance that the demand for the trading conditions of betting shops to be put on a modern footing cannot be resisted. It is on that basis that I move amendment No. 101.
Amendments Nos. 102 and 103 are amendments to delay the coming into effect of the changes being made by section 68 of the Bill as initiated. Section 68 amended section 18 of the Finance Act, 1931, to provide for an increase in the excise duty on the registration of a bookmaker's premises from the current rate of £200 per annum to £300 per annum. The increase in this duty was linked to, and broadly in line with, the increased opening hours for bookmakers' premises provided for in section 67 as initiated.
As a consequence of the delay I have made until 1 April 1999 in the implementation of the extended opening hours for bookmakers' premises, I now propose to also defer the coming into effect of the increase in bookmaker premises registration duty until 1999.
For technical reasons due to the fact that bookmakers' premises licences fall to be renewed after 30 November each year, I propose that the excise duty increase be deferred until 1 December 1999.
Amendment agreed to.
Section 67, as amended, agreed to.
SECTION 68.
I move amendment No. 102:
In page 85, line 40, to delete "1998" and substitute "1999".
Amendment agreed to.
I move amendment No. 103:
In page 85, line 45, to delete "1998" and substitute "1999".
Amendment agreed to.
Section 68, as amended, agreed to.
SECTION 69.
Question proposed: "That section 69 stand part of the Bill."
Will the Minister elaborate on that section on gaming machines?
This section amends section 43 of the Finance Act, 1975, which deals with licence duty on gaming machines. The purpose of the amendment is to add Fridays to the Saturday, Sunday and public holiday period validity for the reduced gaming machine licence.
The proposed change is in response to representations from the trade who have pointed out that the current "weekend" licence, which enables holders to open on Saturdays, Sundays and public holidays, does not allow them to pick up any business from, for example, persons who arrive at resorts on Fridays for their weekend break. As traders require a full, seven day, gaming machine licence to do business on Fridays at present, this amendment will enable them to avail of additional trade at no extra cost.
The new arrangements will apply with effect from 1 May 1998.
Does this refer to the licence held by somebody who is operating a premises with gaming machines?
It relates to the machines themselves.
The reason I asked the Minister to elaborate is that I am wondering whether the Minister is satisfied that the current requirements of the law are attired to in full. Due to the input of local authorities we are all aware that these machines are maintained illegally. Certainly, that is the case in this city. In that case, I presume that they do not either apply or pay for the licence. In terms of general compliance, is the Minister satisfied that the law is being complied with at present?
May we go into private session, Chairman, to allow the experts to explain it?
Is that agreed? Agreed.
The Select Committee went into private session at 10.55 a.m. and the public session resumed at 10.58 a.m.
Question put and agreed to.
Section 70 agreed to.
SECTION 71.
I move amendment No. 104:
In page 86, lines 38 to 43, to delete subsection (3).
The reason I am disoriented is that yesterday, in the confusion about the new numbering, we indicated we wished to reserve our position in respect of re-entering certain matters on Report Stage. As regards section 18, dealing with capital allowances for fishing vessels, I wish to try to construct an amendment for Report Stage.
The purpose of my amendment to section 71 is to remove the increase on unleaded petrol so as to draw a distinction between leaded and unleaded petrol in the hydrocarbons area. The simple deletion I have proposed may not meet that requirement but an incentive to use unleaded petrol should be built in.
I did not increase the cost of unleaded petrol in the budget and the effect of Deputy Rabbitte's amendment would be the opposite of what he intends. The Budget Statement and Financial Resolutions of 3 December made no change to unleaded petrol.
The difficulty arises because the Minister imposed an increase on super unleaded petrol. I do not know what problem there is with super unleaded but I gather there are environmental and health aspects.
The purpose of section 71 is to confirm the selective budget increases of four pence per litre in excise duty on leaded and super unleaded petrol. These increases were contained in Financial Resolution No. 2, which was voted on and passed by the Dáil on budget day, 3 December 1997. The rate of excise duty on the more environmentally friendly unleaded petrol was not increased on that occasion. The increases to leaded and super unleaded petrol are for well known environmental reasons. The primary purpose of the rate changes are to further encourage the substitution of unleaded petrol for both leaded and super unleaded petrol.
Section 71(3) provides that the rate of excise duty on ordinary unleaded petrol does not increase in line with leaded and super unleaded petrol. In order to maintain the current rate of excise duty on ordinary unleaded petrol at the levels set in 1997 - that is, £294.44 per 1,000 litres - the rate of rebate is increased from £33.87 to £66.92 per 1,000 litres. If this subsection were to be deleted, as is proposed in the amendment, it would mean the rate of rebate set in 1997 would remain the same with a resulting increase of four pence per litre, including VAT, in the rate of excise duty on ordinary unleaded petrol. For these reasons I cannot accept the amendment.
I can confirm that was not my intention.
If Mr. Roger Garland is watching I apologise to him. If I may return to my disorientation this morning, I gather I have missed amendment No. 100 and I give notice that I wish to re-enter it on Report Stage.
Is there a breakdown of the percentage sales of super unleaded petrol? People believe that by buying super unleaded petrol they are helping the environment but in fact they are doing the opposite. We should stress this point because many are not aware of it.
Super unleaded petrol accounted for approximately 4.2 per cent of total petrol consumption in 1997, which is very small. It is anticipated this will fall further to 3.8 per cent in 1998. The tax on super unleaded petrol is 48.2 pence per litre, of which 35.7 pence is excise duty. This is 8.3 pence per litre more than the tax on unleaded petrol. The excise yield is expected to be £23.3 million in 1998, including an additional yield of £2.5 million due to the duty increase.
Amendment, by leave, withdrawn.
Section 71 agreed to.
NEW SECTION.
I move amendment No. 105:
In page 87, before section 72, to insert the following new section:
"72.(1) Section 21 of the Finance Act, 1935, is hereby amended-
(a) in subsection (15)-
(i) in the definition of 'motor vehicle' (as amended by section 84(6) of the Finance Act, 1994) by the insertion after 'on roads,' of 'including any vehicle which is designed, constructed or modified to be suitable for traction on a road by a mechanically propelled vehicle,', and
(ii) by the insertion after the interpretation of 'mobile well drilling equipment' (inserted by the said section 84(6)) of the following definition:
'the expression "fuel tank" means any tank in or on a motor vehicle which is used or is capable of being used to supply fuel for combustion in the engine of the motor vehicle for the purposes of propulsion or of another motor vehicle which can provide traction for such purposes;',
and
(b) by the insertion of the following subsection after subsection (15):
'(16) For the purposes of the definition of fuel tank in subsection (15) of this section, it shall be presumed, until the contrary is shown, that a tank is capable of being used to supply fuel for combustion in the engine of a motor vehicle for the purposes of propulsion if there are any outlets from the tank other than-
(a) those which are permanently and solely connected to and for the sole supply of fuel for refrigeration, oxygenation, thermal insulation or other specialised systems in or on the motor vehicle, or
(b) those which are solely for the purpose of discharging fuel from an oil road tanker to a vessel or tank separate from such oil tanker.'.
(2) This section shall come into operation on such day as the Minister for Finance may appoint by order.".
The purpose of this section is to expand the excise definition of a motor vehicle to include a trailer and also to provide a definition of a fuel tank in order to combat a new source of duty evasion. The amendment is necessary due to the illegal use by certain hauliers of rebated diesel or marked gas oil in so-called "belly" tanks on motor vehicles. Marked gas oil is subject to a lower rate of excise duty. Belly tanks are large tanks with extra fuel lines which are fitted to trailer refrigeration units in addition to the manufacturers standard fuel tank. Refrigeration units on trailers have normally been fuelled from special tanks of rebated oil. Recent developments have involved the installation of large belly tanks with two way switching devices in the cabs of trucks, which enable drivers to draw rebated diesel from such tanks to power the cab units, by-passing road diesel tanks. The use of marked gas oil in this way is almost impossible to detect, due to the driver's ability to switch from the belly tank to the normal fuel tank while the vehicle is in motion.
The purpose of the proposed amendment is to make it an offence to have rebated diesel in a fuel tank on a trailer except when the tank is solely connected for the purposes of refrigeration, oxygenation, thermal insulation, etc. The amendment may be implemented at a later date by ministerial order. This will give hauliers time to adjust tanks so that they only supplied refrigeration or other specialised units.
Amendment agreed to.
Section 72 agreed to.
Sections 73 to 81, inclusive, agreed to.
SECTION 82.
Amendment No. 106 is a drafting amendment, amendment No. 107 is cognate, amendments Nos. 108 and 109 are related and all may be taken together by agreement.
I move amendment No. 106:
In page 94, subsection (12)(c)(iii), line 41, to delete "deducted" and substitute "deduced".
These amendments rectify errors in the Bill at the printing stage. I understand that at the start of the meeting the Chairman changed the word "reduced" to "deduced".
Amendment put and agreed to.
I move amendment No. 107:
In page 95, subsection (15)(b), line 8, to delete "deducted" and substitute "deduce".
Amendment agreed to.
Question proposed: "That section 82, as amended, stand part of the Bill."
Would the Minister explain what is involved in the section?
The purpose of this section is to allow that samples of goods taken by Revenue officers with a view to possible Customs and Excise proceedings may be given to a third party such as a courier to an agency such as the State chemist for analysis. In order to protect the integrity of the samples as evidence in any court proceedings, procedures are stipulated for every stage of the process from sampling to analysis. This measure allows for a more cost-effective method of transmitting Revenue samples for analysis. It was brought to my attention that there is a stage by stage process in prosecution and barristers and solicitors were able to have court cases dismissed if procedures were not exactly followed. This provision will make it easier for the State to win cases.
Question put and agreed to.
SECTION 83.
I move amendment No. 108:
In page 95, subsection (1), line 12, to delete "section 82" and substitute "section 82.".
Amendment agreed to.
I move amendment No. 109:
In page 95, subsection (2), line 17, to delete "to cause it to" and substitute "or cause it to".
Amendment agreed to.
Section 83, as amended, agreed to.
Section 84 agreed to.
I am now required to put the following questions in accordance with an order of the Dáil of 26 February:
"That the amendments set down by the Minister for Finance to Chapters 1 and 2 of Part II of the Bill, and not disposed of, are hereby made to the Bill.
In respect of the sections undisposed of in the said chapters, that the section, or as appropriate the section as amended, is hereby agreed to."
Question put and declared carried.
This question disposed of all amendments up to and including amendment No. 109 on the printed list of amendments. We now move to Part III covering sections 85 to 95.
Sections 85 and 86 agreed to.
NEW SECTION.
I move amendment No. 110:
In page 96, before section 87, to insert the following new section:
87.-Section 4 of the Principal Act is hereby amended by the insertion of the following subsections after subsection (8) (inserted by the Act of 1997):
(9) Where a disposal of an interest in immovable goods is chargeable to tax and where those goods have not been developed since the date of the disposal of that interest (hereafter referred to in this subsection as "the taxable interest") any disposal of an interest in those goods after that date by a person other than the person who acquired the taxable interest shall, for the purposes of this Act, be deemed to be a supply of immovable goods to which subsection (6) applies.
(10)(a) Where a disposal of an interest in immovable goods is chargeable to tax and the person who acquires that interest is obliged to pay rent to another person (hereafter referred to in this subsection as "the landlord") under the terms and conditions laid down in respect of that interest, the landlord-
(i) shall, notwithstanding the provisions of section 8, be deemed not to be a taxable person in respect of transactions in relation to those immovable goods other than-
(I) supplies of those immovable goods on which tax is chargeable in accordance with the provisions of this section, or
(II) supplies of other goods or services effected for consideration by the landlord, or
(III) post-letting expenses in respect of that interest,
(ii) shall not be entitled to deduct tax in respect of transactions in relation to those immovable goods other than-
(I) supplies of those immovable goods on which tax is chargeable in accordance with the provisions of this section other than subsection (4), or
(II) supplies of other goods or services effected for consideration by the landlord, or
(III) post-letting expenses in respect of that interest,
(iii) shall be deemed, where that landlord is not the person who made the disposal of the interest, to be a taxable person in respect of post-letting expenses in relation to that interest and shall in relation to those post-letting expenses be entitled to deduct tax, in accordance with section 12, as if those post-letting expenses were for the purposes of the landlord's taxable supplies.
(b) For the purposes of this subsection post-letting expenses in relation to an interest in immovable goods are expenses which the landlord incurs-
(i) in carrying out services which the landlord is obliged to carry out under the terms and conditions of the written contract entered into on the disposal of the interest which was chargeable to tax but does not include transactions the obligation to perform which is not reflected in the consideration on which tax was charged on the disposal of that interest, or
(ii) which directly relate to the collection of rent arising under the contract referred to in subparagraph (i), or
(iii) which directly relate to a review of rent where the terms and conditions of the contract referred to in subparagraph (i) provide for such a review, or
(iv) which directly relate to the exercise of an option to extend the interest or to exercise a break-clause in relation to that interest where the terms and conditions of the contract referred to in subparagraph (i) provide for such an option or such a break-clause, but do not include any expenses relating to goods or services of the type specified in section 12(3).'.'.
This amendment deals with VAT on long leases of commercial properties. It takes account of the judgment of the Supreme Court in the case of Erin Executor and Trustee Company Ltd. The amendment inserts two new subsections into section 4 of the VAT Act. The first provides that any supply of an interest in property after a taxable supply is exempt from VAT. This confirms the general position that the supplier of a property is only subject to VAT once, unless it is redeveloped. While the Supreme Court judgment did not deal directly with this issue, concern has been expressed that one of the implications of the judgment could be to make all supplies of property taxable.
The second new subsection gives effect to the Supreme Court judgment and clarifies the circumstances in which post-letting expenses are deductible for VAT purposes. The amendment has effect from the date of passing.
What is the point? Is "wherever the service is consumed" the point?
I will read the note for the Deputy in this regard. However, I can say from personal experience that the most complicated area of VAT law relates to property. It is a nightmare. Some years ago the Revenue Commissioners published a worthwhile booklet to try to explain it to people, but even then it was still complicated. The entire area is a very complicated one.
This amendment concerns VAT and property matters. As a result of the recent Erin Executor case, which I have already mentioned, we feel we have to bring in this particular change in the law. Up until December 1997 the Revenue Commissioners did not allow deduction of VAT on post-letting expenses incurred by a landlord. This meant that VAT incurred by landlords on expenses such as legal, architectural or debt collection services could not be deducted and were a charge on the landlord's business. In December 1997 the Supreme Court found that VAT on post-letting expenses incurred by a landlord in the course of a taxable lease should be deductible. However, post-letting expenses were not defined and the judgment did not fully deal with the circumstances under which VAT deduction should be allowed. This amendment sets out to legislate for the judgment by making post-letting expenses VAT deductible while clarifying the type of expenses concerned and the circumstances in which deductibility will apply. Deductibility will be allowed on (a) expenses the landlord is obliged to incur under the terms of the lease and which are reflected in the taxable value of the lease; (b) rent review and rent collection expenses; and (c) expenses to do with the exercise of a break clause or option to extend the lease.
This section has effect from the date of passing of the Act.
We may be speaking at cross purposes because I am referring to the existing section 87, while obviously the Minister is referring to a new section. Is this section 88 or does it replace it?
No, it will be inserted ahead of the existing section 87 in the Bill as a new section. I was speaking about the new section. I will deal with the initiated section 87 in the next note.
The amendments always refer to the Bill as initiated. The next time you see the Bill all the sections will be different and a new explanatory memorandum will be issued. It took me an entire year working with the Finance and General Affairs Committee before I was able to figure it out for myself. I do not blame the Deputy for being confused because I was totally confused about it myself the first time I sat through the Finance Bill on Committee. At the end of 22 years I think I have figured it out.
Question put and agreed to.
SECTION 87.
Question proposed: "That section 87 stand part of the Bill."
This section amends section 5 of the VAT Act which deals with the supply of services. Due to gaps in the existing legislation certain telecommunication services and financial services consumed within this country by visitors from outside the EU could escape VAT. This section contravenes the basic assumption behind VAT, which is that the place of taxation is the place where goods or services are consumed. Accordingly, the relevant law has been amended to achieve this. For the same reasons the amendments will allow refunds of VAT to suppliers of telephone cards sold here for later use outside the EU. The changes in relation to telecom services are necessary to fully implement the relevant EU rules in Irish VAT law.
The change in relation to financial services closes off an anomaly under which, for example, a bureau de change could claim VAT input credits for that part of its business involving services to visitors from outside the EU.
This section will come into effect from 1 May 1998. I am assured by my advisers that it is essentially a tidying up exercise.
What does the financial services clause mean in respect of mentioning non-business?
Tourists from outside the EU.
Question put and agreed to.
SECTION 88
I move amendment No. 111:
In page 98, paragraph (a), to delete lines 34 to 40 and substitute the following:
"(ii) by the substitution in subparagraph (iii) (inserted by the Act of 1997) of 'services specified in subparagraph (i) and either or both of goods of the type specified in subparagraph (ia) and goods of the type specified in subparagraph (ii) supplied in the circumstances set out in that subparagraph' for 'services and goods specified in subparagraph (i) and (ii)',
(iii) by the insertion of "or" at the end of subparagraph (iii), and
(iv) by the insertion of the following after subparagraph (iii):
'(iv) goods of the type specified in subparagraph (ia) and goods of the type specified in subparagraph (ii) supplied in the circumstances set out in that subparagraph, the total consideration has not exceeded and is not likely to exceed £40,000,'.".
Section 88 amends section 8 of the VAT Act, which deals with taxable persons. These are minor technical amendments to the provisions of the Bill as published, and relate to AI and livestock semen. They provide that (1) where a farmer makes supplies of certain agricultural services and either or both of livestock semen and nursery garden stock, he or she will be obliged to register an account for VAT where turnover from such supplies exceeds £20,000; and (2) where a farmer's actual turnover from the supply of both livestock semen and nursery stock exceeds or is likely to exceed £40,000 he or she will be obliged to register an account of VAT on such supplies.
Will the Minister provide more background information to this?
I have been contacted by numerous Deputies regarding a technical difficulty relating to the provisions of the Bill on AI and bovine semen. Essentially, the question relates to the situation where an AI station would opt to split its business into a farming entity, providing AI services, and a non-farming entity supplying semen only. The intention is that the farming entity will be able to retain its flat rate farmers' status and therefore will not charge VAT on the AI services it supplies. The non-farming entity will be required to register for the tax if annual turnover exceeds a goods registration threshold of £40,000.
However, the question is whether supplies of semen produced on farm by the farming entity to the registered non-farming entities would count for the purpose of the VAT registration threshold. That is not the intention. If the AI station wishes to continue to supply AI as flat rate farmers, rather than as VAT registered traders, they will be able to do so, even in those circumstances. I have been advised that an amendment on Report Stage to clarify the position on AI stations which opt to split their businesses will be necessary.
If people are involved in the same product would one not one be uncompetitive against the other?
Yes. Under current VAT law, AI stations qualify as flat rate farmers and accordingly do not charge VAT on their supplies of insemination services in bovine semen. This treatment stems from the time when licensed AI stations, whose main purpose was seen as protecting the quality of the national stock of cattle, were engaged primarily in insemination services using bovine semen from their own herd. However, direct sales of bovine semen can constitute a relatively minor part of their overall business. The stations were allowed to retain their flat rate status even where the goods registration threshold was exceeded.
However, in recent years direct sales of bovine semen have increased significantly. Most of these direct sales are of semen which has been purchased from abroad. Such sales are primarily to farmers who now trade in AI and can provide services their own herds. The AI stations are now in direct competition with independent traders who also supply semen to farmers and are registered for VAT.
There is a significant competitive advantage for AI stations if they are allowed to remain unregistered. Unlike their competitors, the stations do not have to charge VAT on their supplies of bovine semen. Farmers would prefer to purchase from a source which does not charge VAT because, in general, farmers are not registered for VAT and consequently are not in a position to reclaim any VAT incurred on the purchase of the bovine semen.
The independent operators must register on account for VAT at the current rate of 21 per cent if their annual turnover exceeds £40,000. This VAT treatment places them at a competitive disadvantage vis-à-vis the AI stations. There is no doubt that the independent operators were disadvantaged and that a remedy was needed.
The effect of the amendment is that all suppliers of livestock semen would have to register and account for VAT where their turnover on supplies exceeds £40,000. AI stations whose turnover exceeds that limit would have to register an account for VAT on all their supplies of insemination services of bovine semen. However, it is open to them to separate these activities into two separate entities and incur a liability only on their sales of bovine semen. In this way they can retain their flat rate status for the provision of insemination services. They may not, however, separate their bovine semen sales in the smaller units to avoid registration. As a VAT registered entity, the AI station can recover VAT incurred on all purchases of goods connected with its tax income and supplies.
As part of the overall package for this sector, the VAT rate on livestock semen is being reduced from 21 per cent to 12.5 per cent. Insemination services also qualify for this rate of tax. This reduction is permissible under the EU sixth directive. The cost of the measure to the Exchequer will be minimal and will be confined to cash flow. All the VAT charged on AI and bovine semen would be either deductible in the case of registered farmers or be taken into account in the calculation of the level of the flat rate addition on non-registered farmers. I take it there is no problem with this in Tallaght.
There are few bulls, known as scrub bulls, around Brittas.
Amendment agreed to.
Section 88, as amended, agreed to.
Sections 89 and 90 agreed to.
NEW SECTIONS.
I move amendment No. 112:
In page 99, before section 91, to insert the following new section:
"91.-Section 12 of the Principal Act is hereby amended-
(a) by the insertion in subsection (1)(b)(iii) after 'outside the State' of ', other than services consisting of the hiring out of motor vehicles (as defined in subsection (3)(b)) for utilisation in the State,', and
(b) by the substitution in subsection (2) of 'sections 20(1A) and 20(5)' for section 20(1A)'.".
This amends section 12 of the VAT Act which deals with deductibility. The amendment at paragraph (a) is one of a package of two amendments which I am proposing in response to a recent decision by the European Court of Justice in the ARO case.
The European Court of Justice ruled that the place of supply and service of leasing means of transport is the place where the lessor is established, not the place where the means of transport was used. The effect of the judgment is that a leasing company in another member state can lease vehicles to Irish customers and not charge Irish VAT. Instead, the leasing company will charge VAT at the rate applicable in the other member state and the customer will be able to reclaim it if the rules of the member state allow it. In Ireland, we do not allow business customers to reclaim VAT on the purchase or lease of their business cars, therefore, if we do not take measures to respond to the court judgment, the Irish car leasing business would be disadvantaged compared with its EU competitors operating in member states with either lower VAT rates or wider deductibility rules.
The judgment has caused a significant amount of disquiet in most member states as it overturns one of the fundamental principles that VAT is charged where the taxable goods or services are consumed. It is understood that the EU Commission intends to bring forward proposals to make legislative changes to the directive in question so as to address the balance in these cases. In the meantime, I have decided to take these measures to clarify and strengthen the existing rules, pending a change at EU level. This will prevent our deductibility regime from being examined and undermined and will ensure that the Irish car leasing industry is not subject to a tax based distortion of competition.
The amendment to section 12 at paragraph (a) is a technical amendment which maintains the status quo in respect of lessors established in other member states and operating in the Irish market at present. We have traditionally prevented foreign lessors from getting deductibility on their purchase of vehicles for leasing out to Irish customers. This was a mechanism for encouraging them to register here and thereby qualify for deductibility of their purchases, in the same way as Irish established lessors. The amendment takes account of the fact that since the ARO judgment, the legal basis applying to such services is no longer the State. The amendment establishes a cross reference in section 12(2) to the new rules concurring unjust enrichment which were introduced when the Bill was published.
Is it the case that if these changes were not made, people would be able to lease these vehicles in another jurisdiction at a lower rate of VAT and reclaim the VAT in some way?
Yes. The European Court of Justice gave its verdict in the ARO case July 1997. The judgment dealt with the place of taxation of cross border leasing from one EU country to another and it has potentially serious consequences for the Exchequer. We do not allow deduction of VAT on car leasing, even for business purposes. The ARO case opens the way for Irish businesses to source their leased cars from leasing companies in other EU countries at more favourable VAT deductibility rules than ours. Under the normal EU rules, the Irish customer could claim back the VAT on the leasing charges from the other country's tax authorities. This is an unacceptable outcome as it would undermine our temporary legal curb on car deductibilities and in so doing cost the Exchequer some £75 million to £100 million per year and undermine the competitive position of the entire Irish car leasing sector.
With other member states, we raised this issue at European level. In the meantime the amendments I propose to sections 12 and 13 of the VAT Act will strengthen existing safeguards in the law to maintain the status quo regarding car leasing. The effect will be that Irish companies could, for example, lease from the Netherlands where lower VAT rates apply. They would be entitled to bring the vehicle to this country and deduct the VAT on the lease. At present under Irish law nobody is allowed to deduct the VAT on leased cars, even for those in the business of car hire. This would totally undermine our existing position at a cost of between £75 million to £100 million. The EU is considering this and there is likely to be a directive, but this will take some time. We are, therefore, taking this opportunity to strengthen our existing VAT law to cover this point.
The other side of the coin is that Irish industry must be competitive with its European counterparts - and it has difficulties in that regard even now. If our competitors can avail of this facility to reclaim VAT on a truck bought in the Netherlands, for example, and we ring fence our position - for reasons which I understand - will we make our transport costs, which are so vital for exports, uncompetitive? I am not speaking about private cars.
It is a good point. It is our understanding that most countries are taking the Irish position in this regard and will resist the ARO judgment because it has serious implications for their exchequer positions also. In the case concerning the leasing of cars from the Netherlands to Belgium, the court found that the Dutch VAT rate should be charged on the lease payments. The consequence of that is that if an Irish business decides to lease cars from the Netherlands, Dutch rather than Irish VAT will be chargeable.
Worse still, from an Exchequer viewpoint, VAT chargeable in one member state to a business in another country may be claimed back by the customer. The basic rule governing these so-called eighth directive refunds is that, in this example, the customer is entitled to deduct the VAT charged. It is governed by the deductibility rule in the supplier's country. Our curbs on deductibility could be circumvented, with resultant distortion in trade, loss of business to Irish car lessors and loss of revenue to the Exchequer.
In regard to the point made by Deputy Coveney, this case only affects the deductibility on car leasing.
So it has no implications for transport?
From my previous experience in another sphere, I know that businesses are allowed deduct the VAT charged on the leasing of a truck.
If I remember correctly, it does not have to be a truck leasing business. Nobody is allowed to claim back the VAT charged on the leasing or sale of cars.
Is that the general position in Europe?
Yes, the only exceptions are Germany and the Netherlands.
Is the Minister saying that a tourist who leases a car at Dublin Airport and goes to Northern Ireland pays VAT at Irish rates at the airport which cannot be deducted or refunded, whereas if the car could be sourced in another jurisdiction VAT would be chargeable at the rate applicable in that jurisdiction and could be reclaimed?
This does not apply to tourists but the Deputy's summations are otherwise correct. In the case in question people in Belgium leased cars from the Netherlands. The deductibility rule under the eighth directive is that the VAT charged on a foreign import is allowed. Most countries, including Ireland, do not allow the VAT charged on car leasing to be reclaimed. However, the European Court of Justice decision allowed that.
If that were to be extended it would mean that Irish companies, rather than leasing cars in Ireland, would lease them from the Netherlands, for example, where deductibility is allowed. Apart from causing a loss of business to Irish car leasing companies, there would also be a loss to the Exchequer because the company would be entitled to claim back the VAT against sales under the ARO judgment. Therefore, there would be a double loss. In addition, we would also have to pay £75 million or £80 million in VAT because under the eighth directive the business person would be allowed to reclaim the VAT on those sales against his VAT.
Is this an interim protection, pending what the Minister hopes will be a directive?
Yes. We hope the EU will issue a directive on the matter because we are not the only country affected by it. However, it just applies to cars. To make matters worse, a Dutch leasing company could source cars here and then——
Is it the domicile of the company that matters?
Yes, the domicile of the leasing company. The kernel of the judgment was that the matter was determined by the tax residence of the leasing company. One could think of all kinds of beautiful avoidance measures in that regard.
I presume it only applies to VAT registered companies——
——which is why it cannot be availed of by tourists and members of the public.
The beneficiaries are companies which lease cars.
Amendment agreed to.
Section 91 agreed to.
NEW SECTION.
I move amendment No. 113:
In page 99, before section 92, to insert the following new section:
"92.-Section 13 of the Principal Act is hereby amended in subsection (3) (c) by the substitution of 'or in respect of motor vehicles (as defined in section 12(3)(b)' for 'or in respect of means of support'.".
This amendment amends section 13 of the VAT Act which deals with remission of tax. This is the second amendment in the package of amendments to cater for the ARO judgment of the ECJ.
The rules in section 13(3) provide for VAT refunds to be given to traders established outside Ireland who pay Irish VAT to suppliers of goods or services here but who are not themselves performing taxable activities in the State.
Up to now, we have prohibited the refunding of VAT to leasing companies who purchase any vehicles - that is, either commercial vehicles or passenger cars - for hiring out or leasing to Irish customers. This was part of our approach to encourage such lessors to register for that business here. We regarded the place of taxation of those lessors as being the place where the vehicles were used. Lessors who are established here and who purchase vehicles for leasing here are granted deductibility in relation to the VAT incurred.
Since the ARO judgment, we must regard the place of taxation of leasing services to be the place where the lessor is established. In the circumstances, it is necessary to make sure we do not disadvantage the Irish customer of a lessor established in another member state when leasing a commercial vehicle. This is because the customer, if fully taxable, is entitled to input credit of all the VAT on the leasing charges. It is necessary to ensure that, if the Irish customer leases from a lessor established in another member state, there will be no trapped VAT. Under the amendment, those lessors will be able to get a VAT refund on commercial vehicles purchased for the purpose of leasing out to customers here.
The same case cannot be made for the customer who leases a passenger car. Such customers are not entitled to deductibility here except for stock-in-trade and cars for driving schools. Therefore, the amendment maintains the status quo in respect of purchases of passenger cars by lessors established outside Ireland. It follows on from the previous amendment.
The Minister used the term "trapped VAT" which I have never heard before. What does it mean?
It is VAT which cannot be deducted. For example, one cannot claim back the VAT paid on the purchase of a motor car or petrol.
It is very easy to mix that up with claptrap. However, it seems reasonable.
Amendment agreed to.
Section 92 agreed to.
SECTION 93.
I move amendment No. 114:
In page 101, line 26, to delete "period--" and substitute "period.".
This amendment clears up a punctuation error in the Bill as initiated. No change of substance has been made to the section as a result of this amendment.
Amendment agreed to.
Section 93, as amended, agreed to.
SECTION 94.
I move amendment No. 115:
In page 101, between lines 41 and 42, to insert the following:
"(b) by the insertion of the following paragraph after paragraph (vc):
'(vd) the supply of the following bakery terms:
fresh scones:- brown, white, fruit; rock buns; donuts:- cream, jam, chocolate; eclairs; fresh cream cakes; yeast bun goods; pancakes; potato cakes; yeast soda; fresh fruit bracks; danish pastries; hot plate goods; fresh apple and all fresh baked tarts.'.".
This may seem a minor matter but a number of Deputies have received strong representations on it. I believe they are from the same constituency as Deputy Rabbitte, so he will know of this as well.
We need as many soundings as we can get.
These goods have no shelf life. They are sold as fresh and cease to be so within 24 hours. I gather the profit margins on them are exceptionally low. They are generally produced by small companies or groups of people and they are competing with partially fresh products with a long shelf life. The industry is relatively employment intensive and, in many cases, the supermarkets which give shelf space to the products do so on the basis that, if they are not sold, they must be taken back. This small sector of the economy is under pressure. Many people involved in the area have been unemployed and have set up little businesses for themselves. For those reasons, there is a case for giving them a zero VAT rate and that is the purpose of the amendment. I ask the Minister to give it serious consideration.
I gave this matter consideration not only as Minister but also when in Opposition.
That was mentioned to me but I did not want to say it.
I also met these people when I was the Opposition spokesperson on Finance. I accept the points made by both Deputy Coveney and others but I regret I must oppose the amendment. The purpose of the amendment is to extend the zero rate of VAT to the items listed which are currently taxed at the reduced rate of VAT of 12.5 per cent, except perhaps for yeast buns, yeast soda and hot plate goods which could be at the standard rate of 21 per cent depending on precisely what they are. Most food in Ireland is zero rated. However, flour based confectionery, biscuits other than chocolate biscuits, food supplied in restaurants and heated foods are taxable at the reduced rate of 12.5 per cent. Chocolate and chocolate biscuits, ice cream, sweets and snack foods are at the standard rate of 21 per cent. Positive VAT rating has always been applied to these items on the basis that they are discretionary items of expenditure.
I am sympathetic to the baking industry and have been in correspondence with it on this matter. Officials in my Department met with these representatives to give them an opportunity for their case to be heard. In addition, the difficulties in making any changes in the current VAT rating structure because of the constraints in EU VAT law were explained to them in detail. Under EU VAT law, member states may retain the zero rates they had in operation on 1 January 1991 but the introduction of new zero rates by member states is forbidden. As the items in question were not zero rated at the time, unlike the situation in the United Kingdom, it is not now open to the Government to apply such a rate. Any attempt to apply new zero rates or even expand the scope of existing zero rates would be open to challenge in the European Court of Justice. There have been restrictions on the introduction of new zero rates for many years.
I have also considered the application of a 5 per cent rate to flour confectionery which would be legally possible under EU VAT law. However, I must rule out such a move due to the adverse budgetary implications. It is estimated that a reduction in the rate on flour confectionery to 5 per cent would cost the Exchequer approximately £15 million per annum. Of even greater significance are the consequences such a move could have for the current rating structure. Introducing a new rate of 5 per cent for bakery produce would inevitably lead to pressure from other sectors which avail of the 12.5 per cent rate to also be put at 5 per cent. To concede to a 5 per cent rate for all categories at 12.5 per cent would cost of the order of £400 million per annum.
Following the meeting with the officials of my Department, the Flour Confectioners and Bakers Association indicated it would meet with the VAT administration branch of the Revenue Commissioners to see if anything could be done under existing zero rate provisions. I understand a meeting has been arranged and Revenue is prepared to examine the matter as sympathetically as possible, especially in regard to any borderline cases.
I did not fully understand the last part of the Minister's reply about the meeting with Revenue and the reference to the zero rate of VAT. It seems to be the opposite of what he said to begin with, that nothing could be done. Could he explain it again?
The idea of the meeting is to see if it is possible for the law to be interpreted in a different and sympathetic way. I am precluded from applying a zero rate to anything which did not have a zero rating prior to 1991. The purpose of the meeting is to see what can be done for the people involved.
The second part of my argument is that I could offer to reduce the VAT rate for flour based confectionery from 12.5 per cent to 5 per cent but if I were to do that, apart from the immediate cost to the Exchequer of £15 million per annum, I would be inundated with requests to reduce the VAT rate from 12.5 per cent to 5 per cent for a range of other products. That would cost approximately £400 million. I do not want to open the floodgates. The meeting between the Revenue Commissioners and the Flour Confectioners and Bakers Association will examine if anything can be done under existing zero rating provisions to solve specific problems. Breads are specifically defined in VAT legislation as being zero rated.
Is the Minister saying he is sympathetic and will go as far as possible with the Revenue Commissioners in interpreting the matter as favourably as possible and that there is some light at the end of the tunnel?
We shall have to wait and see. I know Marks and Spencer in Cork is importing fresh products daily from the UK. I must admit for my sins that I have eaten them. There are small people trying to compete against such companies.
My expertise in this regard is well known. I made a bakery shop in County Kildare famous in my political lifetime. The people concerned are well known business people in Naas. I regret that they decided to close the shop in the past year. It will shortly become a fast food outlet, one of a chain of such outlets owned by a group. The place I made famous and about which I wrote in some books will no longer have its sign at the lights in Naas. Deputy Coveney is correct. I am aware of this problem and of the problems Irish industry faces in this regard. I would like to resolve it but I cannot as my hands are tied under VAT law. Perhaps the meeting between the Revenue Commissioners and the association might be able to resolve some difficulties. It might be possible to interpret some of the existing provisions in a different light. That would surmount some of the problems about which the Deputy has spoken.
I do not fully accept the floodgate theory about the 5 per cent option, unless the Minister's successors will be very weak people. It is a matter for any Minister to stand up to. Is the Minister saying the reduction to a 5 per cent rate on these products alone would cost £15 million?
Is that without any extension?
Yes. The cost would be £15 million for those products alone.
Given the Minister's personal sympathy in the matter, perhaps he could go that far if the meeting with Revenue leads to nothing.
I cannot do so for the reasons I have outlined. I am regularly put under pressure from all types of organisations to reduce the rate from 12.5 per cent to 5 per cent. Consistently Ministers for Finance have refused to do so. The Minister for Finance and the Government come under pressure at various stages and I do not wish to create a precedent in this regard. Despite my sympathy for these people, I cannot countenance a change.
I would not be enthusiastic about a proliferation of rates - this is something we have tried to move away from. We can await the result of the meetings with Revenue which will have the Minister's sympathetic consideration.
Regarding section 94 (b), was there a case before the appeals commissioners in respect of filofaxes?
That is true and we lost the case.
Is the rate not being maintained here? I am not necessarily advocating the cause of the filofax brigade, but in terms of being up to date why is the law not being changed?
We are discussing section 94. Deputy Coveney's amendment would create a new section. Deputy Rabbitte is referring to the actual section.
Perhaps we can deal with Deputy Coveney's amendment before dealing with the issue raised by Deputy Rabbitte.
Will the Minister let us know the outcome of the deliberations with Revenue?
Amendment, by leave, withdrawn.
Question proposed: "That section 94 stand part of the Bill".
Section 94 (b) confirms that the zero rate still applies to books, booklets and atlases. However, the amendment excludes certain items from the zero rate. Diaries and organisers, which are liable at the 21 per cent rate, are specifically mentioned in order to clarify the law following an appeals case. The other excluded items are listed in order to ensure the scope of the zero rate is crystal clear for the benefit of the printing trade in particular.
What does that mean in respect of organisers? What is the VAT rate?
They continue to have a VAT rate of 21 per cent.
Therefore, the decision of the commissioners was wrong in our view and we are re-imposing a VAT rate of 21 per cent.
Yes. Stationery, including diaries, has always had a VAT rate of 21 per cent.
I will take advice before Report Stage.
Is 21 per cent the VAT rate on newspapers?
Newspapers have had a VAT rate of 12.5 per cent for some time. The rate was previously higher.
What is the VAT rate on periodicals, magazines, etc.?
Following changes in the Finance Bill, all periodicals will now have a VAT rate of 12.5 per cent. Previously, some had a VAT rate of 12.5 per cent while most had a rate of 21 per cent. There were some unusual classifications of items at the different rates. For example, the RTÉ Guide was classified as a paper and had a VAT rate of 12.5 per cent.
Question put and agreed to.
SECTION 95.
I move amendment No. 116:
In page 102, paragraph (b), to delete lines 23 to 31 and substitute the following:
(e) printed music other than in book or booklet form; but excluding:
(i) other printed matter wholly or substantially devoted to advertising,
(ii) the goods specified in subparagraphs (b) to (e) of paragraph (xva) of the Second Schedule, and
(iii) any other printed matter;'.".
Section 95 amends the Sixth Schedule to the Principal Act which deals with goods and services chargeable a VAT rate of 12.5 per cent. This amendment clears up an alignment error in the Bill as initiated. It clarifies that printed matter as specified in subparagraphs (a) to (e) inclusive of paragraph (12) of the Sixth Schedule excludes items listed in subparagraphs (i), (ii) and (iii).
On the point raised by Deputy Fleming regarding magazines and reduced VAT, does the Minister wish to direct any comment towards magazine vendors who have always claimed VAT to be the apparent reason for the particularly high prices vis-à-vis appreciation against sterling? Is there an argument for having the competition aspect examined now that VAT has been reduced?
As a result of reducing VAT we have written to the Director of Consumer Affairs about these issues. The Deputy rightly points out that the VAT rate of 21 per cent has long been put forward by people in the business as the reason for the very high prices. I have now given them a concession which will cost the Exchequer approximately £1 million in a full year. One would reasonably believe that prices will come down and I hope this will happen. Deputy Rabbitte took some interest in this matter both in Government and Opposition.
It was not one of my spectacular successes. The consumer is annoyed by the fact that it is very difficult to justify the cover price of British and American magazines. The Director of Consumer Affairs, if he has adequate staffing, ought to be asked to monitor whether the reduced VAT rate is being passed on. In their defence for not passing on the value of an appreciating punt it was pointed out by those in the business that magazines are zero rated in Britain while the VAT rate here is 21 per cent. My conviction is that VAT rates alone did not justify the differential.
My officials have written to the Director of Consumer Affairs and will follow with interest what happens to the price of magazines. The differential was put forward by those in the business as a justification for the cover price. We have now reduced the VAT rate to 12.5 per cent and would like to see this benefit being passed on to the consumer.
The VAT rate on some high gloss magazines, considered luxury items, is being reduced from 21 per cent to 12.5 per cent at the cost of £1 million.
The last time such a move was made it was in the context of newspapers. At that time the cost of newspapers went down but increased again very quickly.
The consumer is more watchful now and the office of the Director of Consumer Affairs is better staffed. Consumers are more alert and it is proper that the signal should go out to distributors, who have been suspected in the past of collusive activity, that the situation is being monitored. The report of the consumer authority published some years ago was dubious about the extent to which real competition applied. The consumer ought to expect to get the benefit of the VAT reduction, not just on glossy magazines but on the whole array of magazines which have a big market in Ireland.
I agree with the Deputy. The trade said it would reduce the price and the consumer should be looking out for a reduction. I agree the consumer is much more aware in the 1990s than 20 years ago. I look forward to seeing how the situation, which we will monitor, develops.
Amendment agreed to.
Section 95, as amended, agreed to.
We will now deal with Parts IV and V covering sections 96 to 105.
NEW SECTIONS.
I move amendment No. 117:
In page 102, before section 96, but in Part 4, to insert the following new section:
"96.-Stamp duty shall not be payable on buildings or lands acquired by non-profit making voluntary, sporting or community organisations or bodies, where the purchase of such buildings or lands is to provide sporting, leisure or recreational activities.".
The purpose of the amendment is to deal with the phenomenon of sporting clubs and non-profit making organisations in the community who acquire lands or buildings for sporting purposes. Perhaps such phenomenon can best be illustrated by an example recently brought to my attention. The sporting club concerned spent approximately £250,000 acquiring new grounds upon which to build new clubhouses etc. For that expenditure - much of it borrowed and raised by the local community - they received a letter to the effect that they would get an award of £10,000 from the national lottery. However, a further letter stated that because the work had been done on a voluntary basis by members of the club they were not eligible for the £10,000 award because they could not produce receipts. Simultaneously they received a letter stating they owed £13,000 in stamp duty. There are a proliferation of non-profit making, voluntary, community sporting organisations who have demonstrated tremendous community spirit in acquiring facilities throughout the country. These facilities, because of the phenomenon already discussed and rising house prices, are becoming more and more expensive. It seems especially severe that when members of such clubs come together and do the work themselves they hit for punitive stamp duty.
The purpose of my amendment is to seek the agreement of the Minister to exempt non-profit making community sporting organisations from stamp duty where the purpose is to use these facilities for sporting and leisure activities. I am not talking about circumstances where such clubs would be used for the sale of alcohol or revenue yield. We ought to acknowledge the work done by community organisations. It would make their burden more bearable and their objectives more achievable.
The Deputy is proposing to exempt transfers of land to sporting community organisations where the land is being required for sporting and recreational purposes. I am not sure whether exemption for grant purposes would achieve a major reduction in the overall cost to a sporting body of acquiring land. It is possible the vendor would increase the price when the intending purchaser is a sporting organisation. That means the proposal would result in a loss to the Exchequer with no significant benefit to the sporting organisation. For that reason, I oppose the amendment.
I suggest to the Deputy that what the sporting organisation should do in this regard is seek charitable status. Organisations that achieve charitable status from the Revenue Commissioners receive a CHY number and are exempt from stamp duty.
This has nothing to do with the decision we made yesterday in respect of registered charities. Is the Minister saying that any sporting club has the right to apply for charitable status?
No, there are rules with which organisations must comply before they can get tax exemptions by virtue of their charitable status. There are many thousands of charities with a CHY number in existence.
What would make one sporting club eligible for charity status and not another?
One of the conditions for achieving charitable status is that the organisation must be for the public good and if Articles of Association apply they are changed. Some sporting organisations have successfully applied for charitable status. I am not sure that the particular organisation referred to by the Deputy could do so. I am sympathetic to the Deputy's amendment and the purpose for which it was intended. The situation involves a circular transfer of funds: the State paid a grant out of one pocket and took money in the other. There are many examples of the circular transfer of moneys within the State. I do not think an exemption in this regard would necessarily decrease the cost of land acquisition by sporting organisations. I believe that the seller of any property takes account of the purchaser's potential. I do not think it is possible to achieve what the Deputy is trying to do.
If the Minister takes the example I have given whereby the organisation have acquired the land and have to build a clubhouse. Money has been spent on acquiring the land and the only way they can build the clubhouse is by members of the club collecting bricks etc., from builders, getting donations from corporate sponsors and physically building the clubhouse as a result of which they have disqualified themselves from the lottery award. They cannot seek a receipt from the builder who gave them the 200 blocks. They are then faced with a bill for £13,500 in stamp duty. It is not exactly encouraging community endeavour.
This creates a problem in relation to the black economy. I take Deputy Rabbitte's point that this was voluntary but the State must also guard against the danger that in giving grants it is not funding the black economy.
The Minister mentioned the possibility of such groups achieving charitable status. If they were successful in that regard it would have the same effect on the price of land because whether they get it by charitable status or as outlined in the amendment the effect would remain the same. One might well say there is not much point in achieving charitable status because land prices will rise if they do not have to pay stamp duty.
Those of us involved in community projects are sympathetic to and understand the points raised by Deputy Rabbitte. I am not totally au fait with the payment of grants but I think a change was introduced recently whereby one-third of the required sum had to be raised locally. Under EU regulations efforts made by the group concerned will be taken as their contribution. Raising money was proving to be a major problem for small clubs in particular.
Achieving charitable status is the method we have found works best for scouting and other organisations. With the best will in the world, many end up having a bar and the drug problems which go with that. Deputy Rabbitte identified that problem. There is much to be said for looking at ways to contribute more to groups trying purchase facilities although I see difficulties. Charitable status has been used in a number of operations and to date, it has been successful.
I know clubs which did not employ contractors, did not have invoices for material and did not qualify for grants. Some of the materials came from people who chose to subscribe in that way. The initial thinking behind the provision of grants for sporting clubs is lost along the way. If sporting clubs were highly organised and employed contractors who could complete a job within a certain period, they probably would not need any help from the national lottery, so this self defeating. Will the Minister tell us what qualifies as charitable status? As far as I am concerned, every sporting club should have charitable status. What does the Minister mean when he says some sporting clubs have charitable status and some do not?
There is a general law on how an organisation qualifies for charitable status and for a CHY number. I will arrange for the guidelines and the rules to be forwarded to the Deputy.
Is the Minister suggesting he will change what is already in place?
A number of small clubs are struggling and receive £5,000 or £10,000 from the national lottery. The Minister is not catering for people who are making an input into their clubs by giving a few hours of their time each weekend and by buying materials. It is all right for national sporting organisations which may employ big contractors and sign contracts.
This is a matter for the Minister Tourism, Sport and Recreation. The question of lottery grants has been debated for some time. Even the last Administration set up a study group which reported on this matter before the general election. We will never be able to put in place a system which will meet with universal approval. I accept the amount of voluntary work done throughout the country by sporting organisation and have no hesitation agreeing with Deputy Belton in this regard. However, Deputy Rabbitte's amendment raises a specific point about exempting from stamp duty the cost of the acquisition of lands. I do not favour as a general rule bringing in exemptions.
As regards the celebrated case in the budget, I have used in my defence the fact that PAYE and VAT coming back to the State from a particular building operation will be considerably greater than the amount of money given in grants. The two issues should not be confused. I understand the intention behind Deputy Rabbitte's amendment. It seems unfair the Exchequer is taking stamp duty from sporting organisations but it is handing back Exchequer money by way of subvention by means of a grant. We must look at the two issues separately.
If the Minister for Finance or the Government were to apply that type of thinking to everything, there would be no taxation in certain areas because the people would be paying back what we have given them in terms of benefits. It is not a principle we should adopt. Consequently, I cannot accept the Deputy's amendment.
Will the Minister let me in on the secret of what constitutes a club getting charitable status? Deputy Dennehy offered me the helpful advice that we have done this on a few occasions and I will talk to him privately afterwards. Why would a club in my constituency or the Minister's get charitable status, while another club would not? That is what people outside the House will ask. Does it help that the secretary of the club is a good Fianna Fáil member?
I will ensure my Department and the Revenue Commissioners send details to the Deputy of how an organisation qualifies for charitable status. I do not have the rules with me but an organisation may qualify under a number of heads, including religion, education, relief of poverty or other purposes which benefit the community. The Acts relating to this matter are very old.
Politicians do not qualify.
Over the years I was often amazed at how some organisations qualified for charitable status, while others did not. There are about 8,000 or 9,000 organisations with CHY numbers and 4,000 are active. There are rules under which an organisation must qualify and I have been amazed at how some qualify.
The Revenue Commissioners lay down rules and there is a section within Revenue dealing with this matter.
The need does not arise for most people. Funding in urban areas is directed towards community associations and community councils. I mentioned scouting because I am involved in it and the national organisation advises people. If an organisation does not have charitable status, it is usually because of a lack of knowledge or need. Most organisations would qualify under the rules if they applied. This is similar to the original applications for lottery grants in that some groups availed of expertise when applying but others did not know how to do so. It is hassle for the secretary of an organisation to have to deal with Revenue.
I will withdraw the amendment, which I might resubmit on Report Stage. Perhaps the Minister might send me these obscure regulations. There may be an argument for us to modernise them.
Amendment, by leave, withdrawn.
Amendment No. 125 is related to amendment No. 118 and both may be discussed together. Is that agreed? Agreed.
Has amendment No. 119 been ruled out of order?
I move amendment No. 118:
In page 102, before section 96, but in Part 4, to insert the following new section:
96.-Any exemption from stamp duty on any instrument transferring by way of conveyance or lease an interest in a new dwelling-house or apartment shall apply to such an instrument relating to premises which were the subject of a previous conveyance or lease provided that the person acquiring the interest on the occasion in question is acquiring an interest in residential premises for the first time and is himself or herself taking up residence in the premises as his or her bona fide principal private residence, and the rates of stamp duty specified in the First Schedule to the Stamp Act, 1891, as amended by section 117 of and the Eighth Schedule to the Finance Act, 1997, shall not apply to the instrument.".
Amendment No. 118 attempts to address the difficulties arising in the housing market by looking at stamp duty. I am sorry amendment No. 119 was ruled out of order because it is an important part of the balance I am looking to strike. Amendment No. 118 seeks to eliminate the liability to stamp duty for first time buyers of secondhand houses. Amendment No. 119 proposes imposing a liability for stamp duty on those other than first-time buyers buying new houses.
The reason for these amendments is simple. For a long time we targeted State assistance at the construction industry, partly to encourage the construction of houses and partly to encourage the industry and support the employment it gives. It is clear that in so far as it relates to domestic houses, that support is no longer necessary. It has been necessary in the past and may be necessary in the future. There are reports of labour shortages in the industry. An increasing number of houses is being built and there has been a considerable increase in the number of houses coming on the market. The problem is that those houses are not going to first time buyers or people wishing to live in them, but are bought up by an increasing number of investors.
We need to retarget State assistance away from the construction industry and at those who wish to buy houses. The current difficulty is with first time buyers in particular. We all know, anecdotally and from the newspapers, that it is next to impossible for a single person to buy a house in Dublin and very difficult for young couples. My constituency is old and well-established. The starting price for houses built in Beaumont, which is a typically lower middle class area, is £135,000. No young person or newly married young couple can be reasonably expected to afford that. If they are buying houses, we are encouraging them to get into a level of indebtedness which is unacceptable.
They are priced out of the market by investors. I have no problem with people buying houses for speculative gain with a view to selling them in the future. However, we have a responsibility to tilt the balance against investors, take away some of their advantages and focus our assistance on first time buyers.
Amendment No. 125 proposes to allow first time buyers a refund of stamp duty on the purchase of secondhand houses. The refund is £6,000 or the duty, whichever is lower. This relates to a house costing up to £100,000. By limiting the refund to £6,000, it is targeted at those entering the middle or lower end of the market. We also suggested some provisions to combat abuses.
Home buying is an aspiration for all young people and is one the most stabilising factors in our society. The level of house buying is relatively high here when compared with other countries, but the trend appears to be moving in the opposite direction as a result of the huge inflation in house prices, fuelled by investors and speculators. They are entitled to be in the marketplace but some advantage should be given back to those we wish to assist most - the first time house buyers. This amendment proposes one way of assisting that process, although it will not be dramatic.
The issue of house prices is an important one. The Department of the Environment and Local Government recently set up a committee to look at this topic. It covers a wide variety of issues. I am concerned about amendments such as this one. It is a piecemeal approach to a big problem. I would prefer to wait for a report from the Department of the Environment and Local Government which will cover taxation, grants, zoning, profits, investors and first time buyers.
I agree with Deputy McDowell that we do not need State support for the construction industry. However, the logic of that argument suggests we should abolish the £3,000 grant for first time buyers. I am concerned about reducing stamp duty in certain cases. The problem is there is too much money available for buying houses. By reducing a tax on housing, the money saved will go back to those selling houses. I am not happy with a piecemeal approach to this issue. We will discuss it in a wider forum in the months ahead.
We have an acute dilemma and the discussion of this Bill is an opportunity to take some remedial action to relieve the pressure on young couples, for whom the purchase of a house is rapidly going out of their reach. I am not sure the modest measures proposed in these amendments will conflict with anything likely to be done in a more comprehensive fashion. Deputy Fleming is telling young people "live horse and you will get grass".
With all respect to the Minister of State with responsibility for housing and urban renewal, he has promised action for a long time. It is important we see the colour of his money soon. The problem is getting worse and all that is proposed here is that some alleviation be given in a culture where home ownership is traditionally highly valued. As we said yesterday, traffic is becoming an economic obstacle and a restraint on continued economic growth. We are continuing to push people into the Minister's constituency and counties adjoining Dublin because the purchase price of houses in the city area is beyond the reach of those on average industrial earnings.
The thrust of these amendments regarding secondhand houses will make some contribution to putting them in range of that category of purchaser. In the current climate, the Minister is obliged to make some gesture in that direction. It is most unlikely it will conflict with any measure likely to be imposed by the Minister of State with responsibility for Housing and Urban Renewal. He is on his mettle as regards this issue and it is time we saw some proposals for action. The certificate of reasonable value may not have worked well, but at the rate things are going I am not sure what will happen if we cannot address the issue with whatever proposals the Minister will make.
I agree with some of the sentiments expressed about first time buyers. The previous Government had an opportunity to address this problem while it was in office but I am open to correction by the Minister on this matter.
The last Government increased stamp duty by 65 per cent.
First time buyers' are discriminated against, whether they are buying a new house or buying a secondhand house where they have to pay stamp duty. New houses are rapidly going out of the reach of young couples. Some people cannot even afford to buy a modest secondhand house.
Last week I said we should look at the sale of refurbished houses and buildings in designated areas, etc. When these houses and buildings are being sold they should not have stamp duty applied to them because they are not new.
I am not suggesting that this is a panacea to solve the housing crisis but, as Deputy Rabbitte said, it is an opportunity to do something now. Of course Deputy Fleming is correct that a more comprehensive response is necessary and we await that with interest. It is hard to see how this measure will conflict with it.
I am conscious of what Deputies have said on this matter. I am also conscious of the concerns expressed by various people regarding house prices. I am very aware of the escalating house prices in Dublin because I represent a constituency that has experienced the same phenomenon. In recent years all politicians representing County Kildare, including myself, have experienced the problems relating to the overflow from Dublin and the effects this has had on planning applications.
The aim of the amendments tabled by Deputies McDowell and Noonan is to make housing more affordable by granting a stamp duty relief to first time buyers of new or secondhand houses. I do not believe houses will be more affordable by implementing their measures.
Much has been said and written in the past weeks about the escalating cost of local authority housing to the State. Most commentators attribute the rising prices to the short supply of houses but the Deputies' proposals do not address this fundamental problem. In fact these proposals will ensure vendors further increase the cost of houses because they will think purchasers have more money available to them. Even if that were not the case prices will still rise due to market forces unless the supply issue is addressed.
Any proposed changes to stamp duty on property will need to take account of its possible impact on rising house prices. The Minister for the Environment and Local Government has commissioned a study on house prices, the aim of which is to analyse all available information on trends and factors influencing house prices and the implications of changing house price levels. The results of this study will be made available to the Government to enable it to further develop our housing policy. I am reluctant to pre-empt the outcome of this study.
If I were to implement the amendments the Exchequer would be at a significant loss and no real relief would have been afforded to first time buyers. In fact, vendors will benefit more from this amendment because of the way the market operates. As Deputy Coveney will be aware, interfering in a market for selected items often creates a further imbalance in it. I prefer to wait until the end of March for the results of the study on house prices and I will then make an informed proposal. Therefore, I oppose this amendment.
As a representative of Kildare I am aware that the short supply of land on which to build houses is a major factor in prices. Another consequence of spiralling housing demands is problems with planning permission in Dublin and, increasingly, in Kildare. It is only in the past few years that Kildare has had any problems with the rezoning of land. In future councillors will be reluctant to rezone any land. Councillors, even with advice from planners and experts, have refused to rezone land. Pressure groups have been formed to lobby politicians to prevent land rezoning. This is a very serious situation. Some of the proposed rezoning of lands in many parts of Dublin and Kildare would have been excessive. Dublin councillors are now reluctant to rezone land, even if they get good advice from planners, etc., that it is necessary. No matter what zoning takes place somebody will object to it and put pressure on politicians. When pressure is applied to politicians, particularly in an election year, they will make whatever decisions they like. There are local elections due in 1999. If you take this into consideration we are left with a very serious situation.
Over the years there has also been a reluctance of planners and local inhabitants to accept a greater density of housing. Some experts now believe that a higher density of housing is acceptable but it will be some time before this view is accepted by the public.
There has also been a huge increase in the number of lobby groups all over the country which will make it very difficult for any of these proposals to be implemented. We also must take into account the cost to the Exchequer of the provision of services to housing estates.
Interest rates are currently low by our standards. In the past, like many other people, I have suffered the effects of very high interest rates. I find it hard to believe, as I am sure Deputy Coveney does, that we are in an era of lower interest rates and this will benefit businesses and mortgage holders. For the foreseeable future interest rates will remain low. There will also be implications for our interest rates when we join the EMU on 1 January 1999. We must take these factors into consideration.
As regards any amendments dealing with stamp duty. I would also be loath to interfere from the tax point of view. Stamp duties give a significant yield to the Exchequer. In 1997 the total yield from all stamp duties was £424.8 million. Of these, stamp duties on property contributed £254.3 million. We do not know how many first time buyers buy secondhand houses. Based on data in the Department of the Environment's 1996 annual housing statistics bulletin, the cost of this amendment would be £46 million. If we reduce the stamp duty yield we will have less money to relieve income tax payers. One of our key taxation problems has been that too great a burden has been placed on the shoulders of the income tax payer, both PAYE and Schedule D tax payers. Stamp duty is a relatively painless form of taxation, £254 million of stamp duty comes from stamp duty on property, £75 million from shares, £22 million from cheques, £9 million from insurance policies, £13 million from general deeds, £1 million from penalties, £9.1 million from credit cards, £13.5 million from non-life savings, £2.2 million from Section 84 and £5.5 million from ATM tariffs. Income tax is a much more painful form of taxation. I am committed to reducing direct taxation over the next number of years. For those and other reasons I am not in a position to accept these amendments.
I acknowledge that consultants have been studying this question for a number of months. I hope that the collective thought processes of the Minister's Department and the Department of the Environmnent and Local Government have been frozen while these consultants do the job for us. Nothing in the Finance Bill is helpful to the housing market. The Government's move on CGT is particularly unhelpful.
I believe the opposite. The reduction of CGT will bring more houses on the market.
We have a genuine disagreement here. In his contribution the Minister did not express any concern about the number of new houses being purchased for investment purposes. That is a central problem. We can look at all the supply side solutions in the world but if a growing percentage of new houses are bought for speculative gain we will never satisfy first time buyers. Does the Minister see this difficulty?
The study will address that point. Even before the reduction in CGT was announced in the budget a considerable proportion of new houses were being purchased by people who already owned houses. That is a result of increasing prosperity.
Does the Minister accept that this constitutes a problem?
It is another problem which must be put into the pot with all the other problems. Given our constitutional right to own private property it is a problem which cannot be easily addressed.
We already give incentives to first time buyers and I presume we can, constitutionally, continue to do so. An imposition of stamp duty on the sale of new houses to buyers other than first time buyers or owner occupiers would help first time buyers and raise revenue.
We cannot forbid investors to invest.
I do not suggest that. I simply suggest a liability for stamp duty for buyers other than first time buyers.
I cannot see the Minister's problem in tipping the balance of advantage in the direction of the first time house purchaser and away from the investor. This would surely be a good thing. Deputy McDowell and I know that a comprehensive response is called for but we should seize this once off opportunity to tip the balance in the way I have suggested. I do not accept that this measure would cause house prices to rise. It would equip the first time buyer with a little more money and enable him to stand the competition from investors. If more houses are bought by first time buyers, even if the price of houses rises, it would be an improvement on the present position. We wish to press this amendment.
Commentators and vested interested have been making the point that the action of the previous Government in raising the rate of stamp duty on houses sold for more than £150,000 is causing a logjam in the market. I see no evidence for this. Very few first time buyers buy houses in that price range. We must look with a jaundiced eye at comments made by vested interests in the property trading business rather than give them more credence than they deserve.
Amendment put and declared lost.
Sitting suspended at 12:50 p.m. and resumed at 2:30 p.m.
Amendment No. 119 is deemed out of order because it involves a potential charge.
Amendment No. 119 not moved.
Section 96 agreed to.
I move amendment No. 120:
In page 103, before section 97, to insert the following new section:
97.-(1) Section 59 of the Stamp Act, 1891, is hereby amended by the insertion of the following subsection after subsection (6):
'(7) In subsection (1) "stock, or marketable securities" does not include a share warrant issued in accordance with the provisions of section 88 of the Companies Act, 1963.'.
(2) This section shall apply to contracts or agreements for the sale of share warrants entered into on or after the 4th day of March, 1998.".
This section amends section 59 of the Stamp Act, 1891. The effect of the amendment is to make contracts for the bearer shares liable to stamp duty. Normally when shares in a company are acquired stamp duty is chargeable on the consideration paid for the shares in the same way as stamp duty is chargeable on all other transfers of property. However, by creating a class of bearer share in the company to be acquired and then shifting the value of the company into those bearer shares, stamp duty on the transfer of those shares could be avoided. This is because a document is not needed to transfer bearer shares and, as you know, stamp duty is a charge on documents. My purpose in bringing forward this amendment is to limit the attractiveness of bearer shares as a mechanism for avoiding stamp duty.
Amendment agreed to.
Section 97, as amended, agreed to.
Section 98 agreed to.
Amendment No. 121 has been ruled out of order as it involves a potential charge.
Amendment No. 121 not moved.
Sections 99 and 100 agreed to.
SECTION 101.
Amendments Nos. 122, 123 and 124 are related and are to be taken together by agreement.
I move amendment No. 122:
In page 104, subsection (1)(a), lines 9 and 10, to delete "interest chargeable under".
These amendments relate to section 101 of the Bill, which reduces the rate of interest chargeable on overdue and overpaid stamp duty. Amendments Nos. 122 and 123 are purely technical. Their purpose is to ensure that the only penalties being reduced are those which relate to interest chargeable at the rate of 1.25 per cent per month or 15 per cent per annum on overdue stamp duty. Many of the sections referred to in paragraph (a) of section 101 contain penalties in addition to the penalties which I have mentioned. These amendments make it clear that these further penalties are not being amended.
Amendment No. 124 reduces the rate of interest paid on refunds of stamp duty which arise under section 112 of the Finance Act, 1990. Section 112 grants a relief from stamp duty on large new houses.
Is this for all overdue taxes?
What is the rationale behind this amendment?
This amendment relates to the interest on overpaid stamp duty and will bring this area into line with other changes to overpaid tax. The rate of interest on under collected tax used to be 1.25 per cent per month or 15 per cent per annum and I have reduced it to 1 per cent or 12 per cent per annum. I am doing the same here, bringing this area broadly into line with what the Prompt Payments Bill has imposed on State companies, where the figure is 11.75 per cent.
I think Deputy Richard Bruton introduced that legislation when Minister.
Deputy O'Rourke was so involved with that Bill that one would not be sure which of them brought it in.
Amendment agreed to.
I move amendment No. 123:
In page 105, subsection (1), lines 1 to 12, to delete paragraph (b) and substitute the following:
"(b) Where any interest to which this subsection applies is chargeable, for any period commencing on or after the date of the passing of this Act, in respect of stamp duty due to be paid whether before, on or after such date, such interest shall be chargeable at the rate of 1 per cent per month or part of a month in the case of interest which, but for this paragraph, would be chargeable at the rate of 1.25 per cent per month or part of a month, or 15 per cent per annum, as the case may be, specified in those sections and those sections shall have effect as if the rate of 1 per cent per month or part of a month were substituted for the rate so specified.".
Amendment agreed to.
I move amendment No. 124:
In page 105, between lines 17 and 18, to insert the following subsection:
"(3) As respects any month, or part of a month, commencing on or after the date of the passing of this Act, section 112 of the Finance Act, 1990, is hereby amended-
(a) in subsection (3)(b) by the substitution for 'one per cent.' of '0.5 per cent', and
(b) in subsection (6) by the substitution for 'one per cent.' of '0.5 per cent'.".
Amendment agreed to.
Section 101, as amended, agreed to.
SECTION 102.
Question proposed: "That section 102 stand part of the Bill."
Is it clear that in this case the provisions concerned are obsolete?
As part of tidying up the stamp duty code, I am providing for the repeal of certain obsolete and superfluous provisions which are no longer required.
Part IV refers to capital acquisitions tax and I intend to table an amendment on Report Stage which will extend the stamp duty relief available for stock lending transactions contained in section 150 of the Finance Act, 1995.
To what does stock lending refer?
Securities lending or stock lending as it is also known is a mechanism whereby securities are transferred temporarily from one party to another. Legally, the transaction involves the disposal and acquisition of stock with provisions to undertake an opposite transaction at a future point. The taxation of such transactions means charges to capital gains tax, income tax or corporation tax might arise, despite the fact that the substance of the transaction is essentially lending.
This is a stamp duty amendment which is sought by the Stock Exchange to facilitate the transaction of security lending.
I would hate those chaps to be unduly penalised.
Question put and agreed to.
NEW SECTIONS.
Amendment No. 125 in the name of Deputy Noonan has been discussed with amendment No. 118.
I move amendment No. 125:
In page 105, before section 103, but in Part 4, to insert the following new section:
"103.-(1) Subject to the provisions of subsection (2) of this section any instrument giving effect to the purchase of a dwelling-house or apartment where it is shown to the satisfaction of the Revenue Commissioners that:
(a) any person to whom this section applies has not previously been the owner of or entitled to any beneficial interest in any other dwelling-house or apartment, and
(b) any person to whom this section shall apply shall reside in the said dwelling-house or apartment as their sole or principal place of residence for a period of ten years, subject to the exemption of subsection (3) of this section, and
(c) any person who ordinarily resides in the said dwelling-house or apartment for more than 90 days in any tax year within a period of five years from the date of the instrument giving effect to the purchase shall be a person who shall have a joint beneficial interest in the dwelling-house or apartment with any other person or persons who ordinarily reside therein for more than 90 days in any tax year, except where that person is a minor child of any person ordinarily residing therein, an incapacitated person or a dependent relative within the meaning of section 466 (2) of the Taxes Consolidation Act, 1997, and
(d) that any person ordinarily residing in the dwelling-house or apartment to which paragraph (c) applies is a person to whom this section would apply if that person was a party to the instrument giving effect to the purchase of the said dwelling-house or apartment,
then any stamp duty payable on any such instrument shall be reduced by a sum equal to the amount of the stamp duty payable thereon or £6,000 whichever is the lesser subject to the provisions of subsection (6) of this section.
(2) For the purpose of determining whether this section shall apply to any instrument, the Revenue Commissioners may require the delivery to them, in such form as they may specify, of a statement or statutory declaration by-
(a) any person directly or indirectly concerned with any instrument giving effect to the purchase of the dwelling-house or apartment, and
(b) any solicitor acting on behalf of any person to whom paragraph (a) or subsection (1)(c) and/or (d) applies,
of any facts which the Revenue Commissioner consider relevant in the making of any such determination. The provisions of section 5 of the Stamp Act, 1891, shall apply except that the provisions of subsection (3)(i) thereof shall be construed as if the sum of '£1,000' was deleted and the words 'a sum equal to the stamp duty payable on the instrument was inserted' therefor.
(3) The relief shall cease to be applicable to the instrument giving effect to the purchase of the dwelling-house or apartment if the said dwelling-house or apartment is sold or compulsorily acquired within a period of ten years after the date of the instrument giving effect to the purchase and is not replaced within a period of one year of the sale or compulsory acquisition by another property to which the provisions of subsection (1) would apply if the replacement property and the property sold or compulsorily acquired were deemed to be the same property.
(4) In the event of a dwelling-house or apartment or any replacement property ceasing to quality at any time during the period of 10 years any person to whom subsection (2) shall apply shall notify the Revenue Commissioners by filing a return to the Revenue Commissioners in such form as they may from time to time prescribe within 30 days of such an event occurring. The date upon which the instrument shall be liable to tax shall be the date upon which the event occurs.
(5) For the purpose of this section a principal private residence shall be a dwelling-houses or apartment to which the provisions of section 604 of the Taxes Consolidation Act, 1997 applies.
(6) The Minister for Finance may be regulations restrict the relief in this section to such dwelling-houses or apartments by reference to floor area, location or situation as may be prescribed from time to time.".
Amendment put and declared lost.
The following Members are recorded as dissenting: Deputies Coveney, McDowell and Rabbitte.
SECTION 103.
Question proposed: "That section 103 stand part of the Bill."
With regard to capital acquisitions tax, charges arise when one member of a cohabiting couple dies. They are treated as strangers and a full charge of inheritance tax applies. Will the Minister consider introducing relief in this regard in the future?
I must declare a personal interest in the issue the Deputy raises because I have been cohabiting with another person for many years. In the event of death I will be caught by the existing capital acquisitions tax provisions.
I have not tabled amendments in this regard because it is a complex matter and finding an amendment to deal with the problem which would be in line with Irish law and the Constitution has proved difficult. There are a number of substantial problems, including difficulties with definition, which have been identified in attempting to provide a general relief or exemption from capital acquisitions tax treatment of cohabiting couples. Any extension of the married treatment for capital tax purposes would involve recognising relationships in the tax code which are not recognised in the context of general law. In general, it is not appropriate for tax law to pre-empt general law.
On account of my circumstances I have steered away from the matter in case I would be seen as engaging in special pleading. However, I recognise it is a serious problem, although I am not sure how it might be tackled in Irish law.
The Department of Social, Community and Family Affairs has found a way to define it.
When I was Minister for Social Welfare the then Minister for Finance, now the Taoiseach, was asked regularly why the tax code did not coincide with social welfare code. I do not know how the Department of Social, Community and Family Affairs gets around the matter. There are difficulties in the taxation which are not as amenable to change.
I tabled amendment No. 27 to the personal income tax provisions which was taken from the social welfare provision. It states:
For the purpose of income tax assessment, married persons shall mean-
(a) a man and woman who are married to each other, or
(b) a man and woman who are not married to each other but are cohabiting as man and wife.
That is how the social welfare code deals with the matter. Predecessors of the Minister promised that in the wake of the divorce referendum this matter would be tidied up. It is unsatisfactory and is hard to defend a situation in which the State has one view when giving money and another when taking money.
That is precisely the problem. It is a matter with which officials in the Department of Finance and others have been wrestling for some time. It is a serious problem.
Perhaps identifying a period of cohabitation prior to death might help in the definition.
We will look at that matter but there are many complexities associated with it. I will consider the matter further before next year's Finance Bill, now that I have declared my interest. We must find a solution to the problem.
Question put and agreed to.
I move amendment No. 126:
In page 106, before section 104, to insert the following new section:
104.-(1) Section 117 of the Finance Act, 1993, is hereby amended-
(a) in paragraph (b), by the substitution of 'one per cent.' for 'one and one-quarter per cent', and
(b) in paragraph (c), by the substitution of 'one per cent'. for 'one and one-quarter per cent'.
(2) This section shall have effect in relation to probate tax due before, on or after the date of the passing of this Act where the period in respect of which interest is to be charged, or a discount falls to be made, commences on or after that date.".
This section reduces the rate of interest charged on overdue probate tax from 1.25 per cent per month or part of a month to 1 per cent per month or part of a month.
Amendment agreed to.
SECTION 104.
Question proposed: "That section 104 stand part of the Bill."
Since people may not seek a grant of probate immediately they may get into serious delay innocently. In the experience of the Revenue Commissioners is there a high incidence of delay and do they use their discretion to waive the charges in cases of delay?
How soon do the penalties take effect?
Where the general requirement to pay probate tax before probate or letters of administration is granted may pose an obligation on the executor or administrator to borrow funds to pay the tax, a discount is allowed for early payment. The discount applies where the tax is paid at least one month before the commencement of the interest charge, which is nine months after the date of death, and will amount to 1 per cent of the tax due for every full month prior to this commencement date. Thus, if the tax is paid four months prior to the commencement charge, that is within five months of the date of death, a discount of four per cent will be allowed for. The discount system was introduced to compensate for the cost of interest charged on money borrowed to pay probate tax. It is a carrot and stick approach.
Unlike most other cases people are often unaware of the need to pay probate tax. They may not extract a grant of probate for some years and they may find themselves in paying interest. The tax is relatively new. Do the Revenue Commissioners have a general power to discount it if they wish or not to charge the interest? Is it used frequently.
There are hardship provisions which allow the Revenue Commissioners to do that. In the event of liquidity problems they can exercise discretion.
Is non-payment of probate tax not an impediment to title? Does one inherit even if one does not discharge the probate?
Yes, one does but the difficulty is that because one does not need to prove title unless in the case of remortgaging or selling, one may not chose to change the name on the title for some years if that is the only asset. A grant of probate may not be extracted for some years after the death.
I presume this situation applies to all these capital taxes. From the State's viewpoint it remains as a charge on the property. They are self-collecting.
I was under the impression that until the probate issued one did not inherit.
That could not be so, because with grants, administration and probate, they are not taken out for many years. A person would be entitled to that particular property, but if her or she wanted to effect the Title or wanted to sell the property, other inheritance tax would have to be paid.
Amendment agreed to.
Section 104 agreed to.
SECTION 105.
I move amendment No. 127:
In page 107, subsection (1), line 8, after "section 36(2)" to insert "in respect of the gift or inheritance in relation to which the decision or assessment is made".
This is a purely technical amendment. Section 105 of the Bill inserts a new section to the Capital Acquisitions Tax Act, 1976, which ensures that a person who is aggrieved by a decision or assessment of Revenue must deliver a self-assessment return and pay tax in accordance with that return before being allowed to appeal against that decision or assessment. The purpose of this amendment is to ensure that the self-assessment return which the appellant must deliver before being allowed to appeal relates to the gift or inheritance under appeal and not to any other gift or inheritance.
Amendment agreed to.
Section 105, as amended, agreed to.
NEW SECTIONS.
Amendments Nos. 128 and 129 are related and will be taken together by agreement.
I move amendment 128:
In page 107, before section 106, but in Part 5, to insert the following new section:
"106.-Section 127 of the Finance Act, 1994, is hereby amended by the insertion of the following subsection after subsection (6):
'(6) To the extent that property of a company ("the first company") or a business ("the first business") are used wholly or mainly by an associated company ("the second company") or another business ("the second business"), such property shall, for the purposes of this section, be deemed to be owned by the second company or the second business in determining whether such property consists of a business or an interest in a business or shares in or securities of a company which will qualify under the provisions of this section.'.".
These proposals relate to the transfer of family businesses and provide for the more complex structures now in existence. The proposals are generally dealt with, as of now, by concessionery arrangements with Revenue. This amendment will give effect to what is general practice.
This amendment is apparently intended to ensure that business relief is not denied to a subsidiary company whose assets consist of property and/or inter-company loans which are used by other trading companies, within the same group, for the purposes of their trade. The business of such a company would not be excluded from relief under section 133 of the Finance Act, 1994, since an exception is made in that section for companies whose business consists wholly or mainly in the holding of land or buildings wholly or mainly occupied by members of the group which are trading companies. Neither would the assets of such a company be excluded from relief under the heading of "expected assets" provided they are used for the purposes of the trade carried on by the trading subsidiaries.
If I understand the amendment correctly, the situation envisaged by the Deputy would qualify for business relief as the legislation stands.
It is not a matter of concession?
No. Accordingly, I must oppose the amendment.
Amendment, by leave, withdrawn.
Amendment No. 129 not moved.
I move amendment No. 130:
In page 107, before section 106, but in Part 5, to insert the following new section:
"106.-Section 19(5)(a)(ii) of the Capital Acquisitions Tax Act, 1976 is hereby amended by the addition after the words 'agricultural property' of the words 'or within such other periods of time as the Revenue Commissioners shall in the particular circumstances determine to be reasonable'.".
This relates to the compulsory purchase of agricultural land. At present only one year is allowed for reinvestment. In other words, if someone's agricultural land is compulsorily acquired and if they do not reinvest in an alternative farm within a year they could have a very serious tax liability. Some people could have difficulty in meeting that deadline and this amendment seeks to give the Revenue more time where they feel that is fair and reasonable.
A sale of agricultural property within ten years after the taking of a gift or inheritance may result in a clawback of agricultural relief if it is not replaced by other agricultural property within one year of the date of the sale. This amendment is intended to ensure that the clawback will not arise if the reinvestment takes place after one year of the sale but within a reasonable period of the sale as determined by Revenue.
The Revenue inform me that they are not aware of any case where this one year period has caused a problem but in any event it would be very unsatisfactory to give the Revenue a discretion in this matter as it would mean that there could never be any certainty as to whether any particular sale resulted in the clawback. No case has come to the attention of Revenue where this has been a problem.
If somebody in good faith was seeking actively to reacquire another farm in a situation where they had a compulsory purchase order, it would seem reasonable that the Revenue would take that into account.
The Revenue Commissioners have discretion in a hardship case to look at a matter such as that. I assure the Deputy that if anything comes to light between now and next year's Finance Bill I will again look at it.
Amendment, by leave, withdrawn.
I move amendment No. 131:
In page 107, before section 106, but in Part 5, to insert the following new section:
"106.-Section 19 of the Capital Acquisitions Tax Act, 1976, is hereby amended in the definition of 'agricultural value' by the deletion of 90 per cent and the substitution therefor of 100 per cent.".
Amendments Nos. 131 and 134 are related and I will speak to both amendments.
The amendments relate to capital acquisitions tax. In recent years successive budgets have provided for an encouragement of the transfer of farms and businesses. In the 1997 budget 90 per cent of the value of a farm or business fell out for the purpose of establishing capital acquisitions tax. It would be consistent to increase that to 100 per cent for both farms and businesses. Because of the difficulty of transferring businesses from generation to generation, particularly farms where the age cohort is still extremely unfavourable and very high, anything we can do to encourage young farmers to persuade their parents to hand over farms without the payment of substantial sums of money is something to be desired. The same would apply to family businesses. That is the purpose of amendments Nos. 131 and 134.
The purpose of this amendment is to exempt from mainstream capital acquisitions tax all gifts and inheritances of agricultural property taken by farmers. Deputy Noonan has put down similar amendments in relation to business assets and probate tax.
My predecessor as Minister for Finance, Deputy Quinn, increased agricultural relief from 30 per cent for land and buildings on amounts over £250,000 and 25 per cent for livestock and machinery, to a flat 90 per cent over his term of office.
At this stage, although there is no significant cost involved, for broad equity reasons 100 per cent agricultural relief for mainstream capital acquisitions tax would not be appropriate. Under the existing relief a farmer can transfer a farm worth approximately £2 million to a child free of mainstream capital acquisitions tax. Accordingly, I oppose the amendment.
There is a certain logic in what Deputy Coveney says. If we have gone so far with capital acquisitions tax regarding business relief, why not go the whole way? There should be some capital acquisitions tax liable to be paid by some farmers and businesses on the transfer of assets. If Deputies Coveney and Noonan want to suggest that we do away with all these capital acquisitions taxes, I do not think for broad reasons of equity it would be appropriate to go further than 90 per cent. The reliefs that the former Minister for Finance, Deputy Quinn, introduced are very generous. I do not know if the Labour Party's current finance spokesman is as generous in his thoughts on this matter, but the reliefs are there now and I have no plans to change them.
I recall that the Minister asked last year why it was not done away with altogether rather than introduce relief rates of 90 per cent. There is logic in abolishing it. I will not press the amendment, but I would like my dissent put on the record.
Deputy Coveney will be recorded as dissenting.
Amendment, by leave, withdrawn.
Amendment No. 132 introduces a new section. Amendments Nos. 133, 135 and 136 are related and may be taken together, by agreement. Agreed.
I move amendment No. 132:
In page 107, before section 106, but in Part 5, to insert the following new section:
"106.-Section 109 of the Finance Act, 1993 is hereby amended in the definition of 'agricultural value' by the deletion of the words 'reduced by 30 per cent of that value' and the substitution therefor of 'as determined by section 19 of the Capital Acquisitions Tax Act, 1976'.".
These are similar measures in relation to probate tax on agricultural land and businesses. At the moment the market value on agricultural land and businesses is discounted by 30 per cent for probate tax purposes. We are suggesting that following the capital acquisition tax changes of last year, we should substitute 90 per cent for 30 per cent for the same reasons, to facilitate the handing on of farms and assets without having to sell in order to pay the probate tax.
As Deputy Coveney has said, for probate tax purposes the value of agricultural land is reduced by 30 per cent. The intention of these amendments is to increase the reduction to 90 per cent and extend it to livestock and machinery. This proposal fails to take into account the whole basis of probate tax, which is to apply a small charge to the majority of estates. It would be inconsistent in approach to except whole categories of assets from the charge. It is difficult to see the argument that the application of a charge of 2 per cent can have anything but the most minimal impact on the transfer of a farm from one generation to the next.
If there are insufficient liquid assets in the estate to meet the tax, the Revenue Commissioners are empowered to postpone payment for such a period and upon such terms as they think fit. It is also possible to insure against liability by taking out a section 60 policy, the proceeds of which will be exempt from all capital acquisitions tax, including probate tax. The cost of this proposal would be £6 million in the full year. Accordingly I am opposing the amendments.
I do not feel as strongly about this as I do about the amendment concerned with CAT.
Amendment, by leave, withdrawn.
Amendment No. 133 not moved.
I move amendment No. 134:
In page 107, before section 106, but in Part 6, to insert the following new section:
"106.-Section 126 of the Finance Act, 1994, is hereby amended by the deletion of '90 per cent' and the substitution therefor of '100 per cent'.".
Amendment put and declared lost.
Deputy Coveney will be recorded as dissenting.
Amendments Nos. 135 and 136 not moved.
That disposes of Parts 4 and 5 of the Bill, covering sections 96 to 105. We will now consider Part 6.
I move amendment No. 137:
In page 107, before section 106, but in Part 6, to insert the following new section:
"106.-Section 905(2)(b) of the Principal Act is hereby repealed.".
This amendment is not as innocent as it looks. I accept it is a blunt instrument, as was one of the amendments I tabled yesterday. It seeks to remove from that section of the Principal Act the exemption which banks have from the requirement to disclose information to the Revenue Commissioners if they ask for it. The Revenue Commissioners have a general power under section 905 of the Taxes Consolidation Act to require individuals, bodies, institutions and companies to provide them with information. It is a very general power but there is a specific exemption in the section as it relates to banks. The Minister will know this arises out of recent controversies where the Revenue Commissioners had some difficulty in requiring the disclosure of particular information unless they already knew account numbers or the names of account holders.
The Minister made some interesting remarks when he responded to questions on Tuesday indicating that he was considering changing the law to give a greater controlling power to the Revenue in specific circumstances. I would like to see the Revenue requiring banks to disclose information in circumstances where there was a prima facie case that a particular product or scam was being operated by a credit institution, specifically a bank. In anticipation of the Minster’s rejection of this amendment, I invite him to explain in greater detail the changes to which he referred in response to questions on Tuesday and on which he was prevented from elaborating as we ran out of time. We can use this opportunity to elaborate on what he might have said on Tuesday.
Section 905 of the Taxes Consolidation Act, 1997, gives to authorised officers of the Revenue Commissioners the power to visit business premises to conduct an audit or investigation. The power extends to the examination of books and records of the business on the premises, the search for them or their removal for further examination. The power does not extend to premises where banking business is carried on. In relation to the audit of a professional person there is a prohibition on access to client files. The prohibition on outdoor audit of banks is in section 905(2)(d), not (b) as suggested in the amendment.
When this power was first provided by the then Minister for Finance, Mr. Richie Ryan, in the Finance Act, 1976, he advised the House that "the exclusion of banking business was done deliberately in order to remove any possibility of a suggestion being made that there was an invasion of the confidential relationship between banker and customer".
I believe successive Governments have generally subscribed to this point of view. Nonetheless I acknowledge that, in the light of recent events, a serious review of Revenue's powers in relation to banks is required.
As I have made clear on a number of occasions, I have asked the Revenue Commissioners and my Department to review the adequacy of Revenue powers generally following the report of the McCracken tribunal. I would not rule out new provisions if they were shown to be necessary, for example, for financial institutions to report to Revenue where they become aware that financial products sold by them may facilitate tax evasion, or to notify Revenue where funds have been transferred, in certain circumstances, to or from particular offshore locations. There may also be new powers for Revenue to access bank accounts where there are reasonable grounds to believe that certain accounts are, or may be, used for tax evasion.
Under the current tax code Revenue can apply to the High Court or to the Appeal Commissioners for an order to access the bank account of a named individual. Before putting forward proposals it will be necessary to have all the relevant information from the series of inquiries under way. The Moriarty tribunal is specifically charged with making recommendations in the areas of banking supervision, the protection of the revenues of the State and offshore accounts. Any proposals put forward will need to be carefully considered to ensure that they will be effective, could not be circumvented, would not needlessly disrupt the affairs of law abiding citizens and would be proportionate in their effect on the financial sector when measured against the problem to be tackled.
Any responsible Government would need to have as much information as possible by way of answer to these issues before it acted. Indeed as part of that information gathering process officials from my Department and Revenue are visiting the tax administrations of other European countries to establish best practice on the question of the balance between bank secrecy and Revenue's right of access to bank accounts.
To accept Deputy McDowell's amendment at this juncture would be premature and irresponsible. I have no intention of being either. Therefore I reject this amendment.
I am interested in what the Minister said. He outlines, fairly succinctly, three different cases in which he is considering additional powers. I strongly urge him to give the Revenue Commissioners additional powers in the instances he has mentioned. I accept the Minister's point that we should await the outcome of inquiries and I take the assurances he has given the committee and which he gave the Dáil on Tuesday as being given in good faith. In view of these assurances I will not press the amendment.
Amendment, by leave, withdrawn.
Section 106 agreed to.
Amendments Nos. 138, 140 and 141 are related and may be discussed together by agreement. Amendment No. 138, in the name of the Minister for Finance, involves the insertion of a new section. The new section, section 107, repeals a credit union provision on DIRT and disclosure of dividends. The acceptance of this amendment will involve the deletion of the existing section 107. Amendment No. 140, in the name of Deputy Noonan, is an alternative to amendment No. 138. Amendment No. 140 proposes lines 7 to 14 of the existing section 107. However, by agreeing to insert the new section 107, the committee has accepted the principle of deleting the existing section 107. Amendment No. 140, therefore, cannot be moved because it refers to the existing section 107. A similar situation arises in relation to amendment No. 141 in the names of Deputies Noonan and Flanagan because it is another alternative to amendment No. 138. Amendment No. 141 proposes to insert a new sub-paragraph to the existing section 107. Again, since the committee has accepted the principle of deleting the existing section 107, amendment No. 141 cannot be moved because it relates to the existing section 107.
That leaves me to oppose the section after the hard work my colleagues did all night drafting the amendment.
I move amendment No. 138:
In page 108, before section 107, to insert the following new section:
107.-(1) The Taxes Consolidation Act, 1997, is hereby amended-
(a) in section 256(1), by the substitution of the following paragraph for paragraph (a) of the definition of 'appropriate tax':
'(a) in the case of a relevant deposit or relevant deposits held in a special savings account, at the rate of 20 per cent, and',
and
(b) in section 891, by the insertion of the following subsection after subsection (1):
'(1A) (a) In this subsection, "credit union" means a society registered under the Credit Union Act 1997, including a society deemed to be so registered under section 5(3) of that Act.
(b) This section shall not apply in relation to any interest paid or credited by a credit union in respect of money received or retained by it.
(2) (a) Paragraph (a) of subsection (1) shall apply as on and from the 6th day of April, 1998.
(b) Paragraph (b) of subsection (1) shall apply as respects chargeable periods (within the meaning of section 321(2) of the Taxes Consolidation Act, 1997) beginning on or after the 1st day of October, 1997.".
I am not sure that your ruling is correct, Chairman. You seem to be saying that we cannot move the Opposition amendments if the Minister's amendment is accepted. The Minister's amendment has not yet been accepted.
The Minister has moved his amendment.
The Minister may have changed his mind on this matter. He may wish to go back to the status quo.
This amendment relates to what was certainly one of the most - if not the most - discussed items in the Finance Bill. The amendment gives effect to the agreement I entered into with the League of Credit Unions in our meeting on 16 February last, that the proposals to impose DIRT on credit union deposit interest and to require reporting of credit union dividend income above £500 would be deleted from the Bill.
In addition, as also agreed, provision is being made to remove the requirement of credit unions to report interest payments in excess of £500.
It was also agreed that a working group will be set up with the league under an independent chairperson to examine the taxation of returns on credit union savings bearing in mind the special and particular nature of the credit union movement, their contribution to society and the wider taxation issues involved. The working group will report its findings to me by 30 September 1998.
My Department is currently undertaking consultations with the Irish League of Credit Unions regarding composition of the working group and a suitable chairperson. I am satisfied that these proposals will offer a reasonable basis for addressing the issue of credit unions taxation.
Interest and dividends received by credit union members was and continues to be taxable and must be included on their returns of income.
The date on which the report is due is also my birthday. If I forget the credit unions I will be unlikely to forget my birthday. I will celebrate both accordingly.
We should congratulate the Minister. He has recognised the valuable role which the credit union movement plays. Now that he is recanting so fulsomely and disarmingly, he may wish to tell us what provoked him to bring in these provisions in the first place.
I have gone over this on many occasions. Money in credit unions may be in share accounts or deposit interest accounts. For a number of years credit union interest on deposits above £500 was required to be reported to the Revenue Commissioners. Some credit unions did not distinguish between one type of account and another and have reported both. Many were surprised to discover, during the recent controversy, that they were not obliged to report dividend income. This was true of some of the largest credit unions.
The deputation from the Irish League of Credit Unions asked me to address three matters. I received a request to meet the League in December. I replied that there was no point in meeting them because I did not intend making any change which would affect them in the Finance Bill, 1998. They, nevertheless, wanted to meet me. They put some ideas to me. They wanted the corporations profit tax exemption to continue. This was necessary because the old exemption referred to the old Credit Union Act, 1966. They wanted DIRT imposed on interest on credit union deposit accounts. People do not often come to the Department of Finance to express a desire to pay tax. It would solve many problems if they did. The imposition of DIRT made sense to the representatives of the League. Interest on credit union deposits must be declared on one's tax return and is taxed at the marginal rate. To pay DIRT at the new rate would benefit credit union members. The standard DIRT rate will be 24 per cent after 6 April and the Irish League of Credit Unions submitted that this would be of benefit to its members. When one pays DIRT, that is the end of the tax liability. That type of interest must be returned on one's account but it is not subject to marginal relief. The Irish League of Credit Unions wanted that provision.
It also wanted a revised approach to the limit on shares. In a period of ten weeks, it put forward three different proposals. After the meeting in December, it wrote to me seeking an exemption threshold on £15,000 worth of shares. If one had in excess of £15,000 worth of shares in a credit union account, the league suggested the dividend above £15,000 would be subject to a new retention tax. It subsequently changed this proposal to a different figure on the Tuesday in the week the Finance Bill was published. When it held a press conference on the Friday of that week, it changed the figure again.
I thought in my innocence that if there was a £500 reportage requirement in relation to credit union interest in any event, why impose further complicated tax measures on dividend shares. The league told me on the basis of its figures that 90 per cent of the total money invested in credit unions is in the form of shares and only 10 per cent is in the form of deposit interest accounts. The 1990 figures show that £150 million was invested in deposit accounts while £1.35 billion was invested in shares. The figures changed in 1996 to reflect a bigger amount of money but that is the approximate ratio.
Of the 90 per cent invested in credit union shares, approximately 1 per cent involves people who have in excess of £10,000 to £11,000. I thought, given that in excess of £500 was reported in relation to credit union interest in any event, the same reportage requirement should be introduced for dividends and no new tax should be imposed. On the basis of the league's figures, I thought it would only affect 1 per cent of credit union members. I considered this would be of benefit to them rather than introducing another tax - although the league wanted another tax in that area - and that was the basis of my original proposals.
It was obvious to me from the coverage on the Thursday evening, Friday and Saturday that the majority of the commentators did not understand the basis of the credit union movement. It was also my view that the majority of credit union members thought the imposition of DIRT would apply to everything. However, that was not the case. It would only have applied to deposit interest, a move which was requested by the Irish League of Credit Unions. Deputy Rabbitte had dealings with the credit union movement in another sphere and it probably did not surprise him that there was such confusion. However, it surprised me. I have a good sense of humour and I recall being in Kildare when this broke. I did not know what was happening in Dublin. My office rang me but I could not stop laughing.
A Deputy
I would say there was great hilarity in the Taoiseach's Office.
I do not think there was great hilarity in other Departments. However, I saw the funny side of it. This either proves that I am weird or other people are weird. It must be the first time in the history of the State that during a Finance Bill a Minister went out of his way to help an organisation by introducing a change, which he thought it wanted, and was pilloried from Malin Head to Caherciveen for doing so. The only matter on which I and the league disagreed was the third proposal and I considered that my approach was much simpler.
I learned many things from this experience, as I stated in reply to parliamentary questions in the House recently. The first is that one should not assume journalists and commentators know anything about what one is discussing. The second is that one should not assume that a representative organisation really speaks for its members. The third is that one should be aware of Greeks bearing gifts.
There was no intention to make this a revenue raising measure. On balance, the opposite would be the case. A sum of £2 million in DIRT payments would be paid, but if everybody returns deposit interest and some of their tax at the higher rate, the position would be neutral. The idea was not put forward by me. The former Minister, Deputy Quinn, had much going for him when he announced that he would not meet any groups before he introduced his first budget in 1995. I will bear this very much in mind in future. If I have any more dealings with the credit union movement, I intend to bring along Deputy Rabbitte. His knowledge of dealings with it will stand to us for many years.
I am reluctant to give advice to the Minister, but he has not acknowledged that there is a compliance problem. I suspect a significant number of people who receive dividend income from credit union shares do not return it for income tax purposes. This reality in addition to the theory must be addressed.
I am glad Deputy McDowell raised that point. I may have referred to it briefly in an interview which took place during those three great days. The previous week everybody had been discussing evasion, but the first time anything was done about it, all hell broke loose. There appears to be a psychological problem about that in Ireland. Deputy McDowell does not suffer from it because his comments have been fair. However, people are against tax evasion as long as it does not relate to them. When the debate moves on and writers and commentators have time to think about it, they will realise how ridiculous some of the propositions they put forward over four weeks appear. I suspect much of the commentary and hullabaloo about this matter was related to the person who introduced the measure rather than the measure itself. Insufficient critical analysis was carried out by some commentators before they went off half cocked about it.
The Minister should be careful about being paranoid. We must acknowledge in relation to dividend income that credit union shares are not the same as shares in anything else. Due to the peculiar structure of credit unions, if people want to join they will generally buy shares before they go beyond the £30,000 limit. Therefore, their primary income from their membership of the credit union is by way of dividend income which is chargeable at the rate of income tax. If we acknowledge the special position of credit unions, we must consider whether it is appropriate to place charges on dividend income on credit union shares in the same way as charges on dividend income are placed on all other shares. I do not consider that is appropriate.
That matter can be discussed by the working group. I was aware before this issue arose that there are different types of credit unions. Deputy Rabbitte is also aware of this. A large number of credit unions have assets in excess of £40 million and put forward the case that they should become banks. They are big organisations and want to progress. However, credit unions in other parts of the country deal with a totally different market. The Irish League of Credit Unions must address this point. Unfortunately, I was dragged into the mire in this regard. This thing never ceases to be funny. I had not concluded an agreement with the Irish League of Credit Unions on the Monday night after the whole hullabaloo, when I received letters from a credit unions disassociating themselves from the vitriolic campaign by the Irish League of Credit Unions and urging me to stick with my original proposals. Not only did I receive letters from individual credit union members exhorting me in that direction, but I received letters from the boards of credit unions exhorting me in that fashion. Had I spoken to my good friend, Deputy Rabbitte, I would have known that, because he must have learned that during the course of the debate on the Credit Union Act, 1997. Unfortunately, I was not so well informed. Hopefully, I will not make the same mistake again.
I attended a number of annual conferences of the credit union movement, including a special conference in Limerick to consider the provisions of that Act. The first thing I saw on entry to an assembly of 900 delegates was a heart ambulance parked at the door. At that stage, I felt I should pay very careful regard to whatever I had to say.
There is a minor, but important, provision in the Credit Union Act, 1997, which permits the development of community enterprise in the local area of the credit union. It is quite important to make the point that a shareholding in a credit union is different to a shareholding in Allied Irish Banks PLC, etc. We have probably paid too little attention to that area of fostering community development, which has taken off in recent years, stimulated to some extent by funds which were available through various EU schemes.
It is a good thing to encourage people who have some disposable income to invest it in shares in their credit union for the development of local enterprise, etc., and that factor ought to be taken into account when the working group is considering the question.
Amendment agreed to.
I move amendment No. 139:
In page 108, before section 107, to insert the following new section:
"107.-Section 212 of the Principal Act is hereby amended by the insertion after '1978,' of 'or Part II of the Credit Union Act, 1997,'.".
Frankly, I do not know what this amendment is about.
I cannot accept Deputy McDowell's amendment because it is unnecessary. I appreciate his motive in wanting to ensure the correct references in the Taxes Consolidation Act, 1997, to credit unions, having regard to the Credit Union Act, 1997. However, I would point out that section 45 of the Bill achieves what the Deputy is seeking as well as relocating the exemption from tax for income of credit unions in the corporation tax chapter of Part 7 of the Taxes Consolidation Act, 1997, which Part deals with exemption from tax.
Amendment, by leave, withdrawn.
Amendments Nos. 140 and 141 not moved.
Question "That section 107 be deleted from the Bill put and agreed to".
I move amendment No. 142:
In page 109, before section 108, to insert the following new section:
"108.-Section 823 of the Principal Act is hereby amended by the substitution in subsection (2)(a)(ii) of the following for clause (I):
(I) an employment, the emoluments of which are paid out of the revenue of the State, except emoluments in respect of services provided outside the State on peace-keeping missions under the aegis of the United Nations, or'.".
As the Minister will be aware, the relief from income tax for persons who are out of the country for 90 days excludes all employees of the State. We are proposing here that it should be applied to those who are involved in peace-keeping under the aegis of the United Nations. We think that would be a recognition of their work and an encouragement to them also.
As Deputy Coveney stated, this is just in recognition of public servants who contribute to peace-keeping. We have always received very positive feedback from peace-keepers who have contributed greatly to the country.
This puts them on a level footing with those in the private sector who are catered for by section 823 of the Principal Act.
I appreciate the purpose behind the amendment. I know that Deputy Timmins speaks from personal experience, having recently been a member of the Defence Forces. I do not think this amendment is necessary.
The amendment relates to the foreign earnings deduction which provides for a deduction from income for tax purposes for time spent on the duties of an employment outside the State. To qualify an individual must be out for at least 90 days in a year made up of absences of at least 14 consecutive days at a time. The deduction is generous, based directly on the time spent abroad. Thus, an individual who is absent for six months would be entitled to a deduction of 50 per cent of his or her income.
The foreign earnings deduction does not apply to the employees in the public sector or to employees of State boards or authorities. The amendment seeks to make an exception to this exclusion for individuals who go abroad on UN peace-keeping missions.
The foreign earnings deduction is aimed at persons going overseas for significant periods, many to developing countries, for the purposes of selling Irish goods and services such as consultancy services. It is, therefore, focused entirely on the private sector, providing an incentive for firms to exploit new markets and expand Irish business and employment.
The extension of the deduction to individuals on peace-keeping duties would involve a total departure from the original objectives of the measure. Peace-keeping personnel are paid by the State and have the option to volunteer for, or refuse participation in, such missions. While abroad, these personnel are compensated through various allowances which are paid tax-free.
If the deduction were given to peace-keeping personnel as proposed, all other areas of the Civil Service and the public sector generally would have valid grounds for seeking their inclusion. Any such wider extension would be very costly, given the generous nature of the deduction. It would also totally change the character of the relief from the targeted measure which it represents at present. For these reasons I cannot accept the amendment.
The foreign earnings deductions were introduced in the Finance Act, 1994, to compensate individuals who must spend a great deal of their time abroad on trade missions or consultancy service. It was a worthwhile measure at the time, but to extend it now to other areas would completely go against the spirit of what it was introduced to achieve.
People in the public sector generally are queuing up to go on these foreign missions. There is no lack of incentive for them to take them up. They want to do it. I cannot agree to the amendment.
Did the Minister cost the extension of the measure if it was to be extended to those on peace-keeping duties?
To take up the Minister's last point, I am sure the Minister knows that in the case of the Defence Forces' duty in the Lebanon, for example, it is increasingly difficult to get people to go on those tours and there have actually been shortages of personnel. As the Minister will be aware, many people are doing back to back tours abroad from six to 18 months at a time. The situation is a little difficult.
For obvious reasons we need a range of confidence building initiatives for the Defence Forces at present. I would be interested in the Minister's view on this and the cost involved. Is it inevitable that the measure would be extended if it was granted to the Defence Forces? Does he see it leading to an inevitable knock on effect in other areas? Perhaps he would state the areas in which that would occur.
I recognise the Deputy has a great interest in this particular matter and any matter related to the Defence Forces, not least because she is the Opposition spokesperson on that matter but also due to her family background.
I have represented the Kildare constituency now for nearly 21 years. Most of the Army vote is in Kildare South so I no longer represent them. I have found the opposite during my political career - people want to go on these peacekeeping missions and there is no problem getting them to volunteer. However, if the Deputy has other information I am willing to look at the matter.
I do not think that the granting of a foreign earnings deduction allowance to the Defence Forces would increase people's desire to go on missions abroad, if that is the intention behind the measure. Defence personnel who go abroad are given generous tax free sums. I do not have the cost of that but it would be small in the context of the overall budget. As other Ministers for Finance have found, if one gives relief in one area on the basis that it will be the last time it will be sought, before the next budget someone else will look for it and it is impossible to justify not giving it, a head of steam builds up behind the relief, politicians are lobbied - which is a legitimate thing to do - election time comes around, parties promise it in their manifesto and it continues to spiral. For that reason, if for no other, I cannot agree to the amendment.
Amendment put.
Members wishing to be recorded as dissenting please raise their hands.
Deputies Timmins, Fitzgerald, Coveney and McDowell raised their hands.
Amendment declared lost.
SECTION 108.
Amendments Nos. 143 to 146, inclusive, are related and may be taken together by agreement.
I move amendment No. 143:
In page 109, line 14, to delete "section 10" and substitute "section 10(1)".
These amendments seek to amend section 108 which contains enabling provisions to allow the Minister for Justice, Equality and Law Reform to make regulations requiring solicitors or barristers on free legal aid panels to hold tax clearance certificates. Amendment No. 143 is a technical amendment to correct an incorrect reference. Amendments Nos. 144 and 145 are technical amendments to include within the tax clearance procedure any statutory instrument made under the Tax Acts, the Capital Gains Tax Acts and the Value Added Tax Act, 1972. While section 108 as it stands allows for the making of a requirement to have a tax clearance certificate, it does not provide an explicit sanction against a solicitor or barrister in the event of non-compliance with that requirement. Amendment No. 146 corrects this possible lacuna by ensuring that the Minister for Justice, Equality and Law Reform can provide for the deletion from the free legal aid panels of the name of a solicitor or barrister who fails to comply with a requirement to furnish a tax clearance. The amendment is advisable lest it be argued that the Minister for Justice, Equality and Law Reform does not have this right.
I have never been on a free legal aid panel so I do not have a direct interest but Members will know I am a solicitor, although I am not practising. I have no problem with this amendment or the original provision. However, the profession would be more given to accept this with alacrity if payments of fees due under the free legal aid scheme were made remotely close to the time they were incurred. I am not sure whether the Minister has any brief in relation to that but until recently there were lengthy delays in paying solicitors and barristers who worked under the scheme.
Why were they excluded in the first place when this applies to everyone else working for the State sector, including the medical profession?
It simply was not done. The requirement of a tax clearance certificate was extended over a number of years and there may have been a reason for that. I have been advised about this - perhaps we could go into private session to allow the experts to explain it.
Is that agreed? Agreed.
The Select Committee went into private session at 3.45 p.m. and the public session resumed at 3.46 p.m.
In response to Deputy McDowell, I am aware that over the years there have been difficulties getting payments from the Department of Justice, Equality and Law Reform but efforts are being made to clear up that matter. I am not briefed as to the current state of play.
It is not solely a matter of self-interest for the individuals concerned because it is important for the proper operation of the scheme that people should be properly remunerated and in good time. It is also important that good barristers and solicitors offer to work on the scheme.
Amendment agreed to.
I move amendment No. 144:
In page 109, line 29, after "Act" to insert "(and any instruments made under those Acts)".
Amendment agreed to.
I move amendment No. 145:
In page 109, line 49, after "Act" to insert "(and any instruments made under those Acts)".
Amendment agreed to.
I move amendment No. 146:
In page 110, line 3, after "Collector-General" to insert the following:
"(within the meaning aforesaid),
(f) matters consequential on, or incidental to, a requirement or condition prescribed under paragraph (d) or (e) of this subsection (which may include a provision enabling the deletion from any list kept pursuant to regulations under this subsection of the name of a solicitor or barrister who has failed to comply with a requirement prescribed under the said paragraph (d)).".
Amendment agreed to.
Section 108, as amended, agreed to.
NEW SECTIONS.
I move amendment No. 147:
In page 110, before section 109, to insert the following new section:
"109.-(1) In this section-
'appropriate percentage' in relation to a year of assessment, means a percentage equal to the standard rate of tax for that year;
'qualifying expenses' in relation to an individual means the amount paid by an individual for specified services;
'specified services' in relation to a year of assessment, means such services as shall be specified, for the preceding year of assessment, by regulations made by the Minister for Finance.
(2) Where an individual for a year of assessment proves that in the year preceding the year of assessment-
(a) the individual, or
(b) if the individual is a married person assessed to tax in accordance with section 1017 of the Taxes Consolidation Act, 1997, the individual's spouse has made a payment for a specified service, then, the income tax to be charged on the individual if the individual made the payment, or on the individual's spouse, if the individual's spouse made the payment, for the year of assessment, other than in accordance with section 16(2), shall be reduced by an amount which is the lesser of-
(i) an amount equal to the appropriate percentage of the full amount of the payment, or
(ii) the amount not to exceed £250 in the case of an individual assessed to tax under section 1017 of the aforementioned Act or is a widow or widower and in any other case £125, and
(iii) the amount which reduces that income tax to nil.
(3) Where the income tax reduction of one of the spouses is ascertained in accordance with subsection (2) then-
(a) if there is no income tax to be charged on the spouse for the year of assessment, other than in accordance with section 16(2), in relation to which relief under subsection (2) may be given, the relief may be given in relation to income tax charged on the other spouse for that year, other than in accordance with section 16(2), and
(b) if the amount so ascertained exceeds the income tax to be charged on the spouse for the year of assessment, other than in accordance with section 16(2), the excess may be used to reduce the income tax to be charged on the other spouse for that year, other than in accordance with section 16(2).
(4) Where relief is given under this section, no relief or deduction under any other provision of the Income Tax Acts shall be given or allowed in respect of the payment or part payment, as the case may be.
(5) For the purposes of determining whether the provisions of subsection (2) shall apply an Inspector of Taxes may require the delivery to him or her in such form as may be specified or such receipts, evidence of payment or other information relating to the provision of such specified services and of any statement or statutory declaration by any person claiming an income tax deduction in accordance with this section.".
This is a small but novel proposal which would empower the Minister to provide tax relief of £250per annum for a married couple or a widowed person and £125 for all other people, which sum would be tax deductible at the standard rate to spend on household services. It would require the use of registered contractors or traders so that in addition to having a small tax benefit to householders it would also have an effect in stamping out the black economy. The idea is that after 5 April the Minister would announce the measure applicable for the previous tax year.
I must be around here a long time - this is so novel that it existed before, between 1979 and 1982. It is understood that the Deputy is proposing tax relief for expenditure on home improvement services by VAT registered providers of these services. The relief would be on expenditure of up to £250 per year in the case of married or widowed persons and £125 in other cases and would be given at the standard rate of tax. The measure may be designed to stimulate demand for these services, thereby creating employment in the regular rather than irregular economy. In that case it is similar to provisions which existed between 1979 and 1982 which provided relief for home improvement work done by registered contractors. That relief was more attractive than that currently being advocated by Deputy Noonan in that it was in respect of expenditure up to £900 in the case of a married couple and £450 for others and was given at the marginal rate rather than the standard rate. The experience of that relief was that contractors operated a two tier price structure depending on whether the taxpayer was claiming relief. Further, it is not known to have created any worthwhile additional employment - most of the contractors involved were already in the tax net and a considerable amount of the work done involved the installation of aluminium windows. Because the cost of administration far outweighed the benefits the relief was abolished in 1983. This latter experience is also repeated in the area of tax relief for rent paid - most of the landlords concerned are already in the tax net.
In a time of ever increasing demands for scarce resources the Government must be selective and critical in its analysis of how these resources are expended. Because of previous experience with similar expenditure reliefs the Deputy's amendment must be opposed. In any event, the idea put forward by Deputy Noonan has been around before. I remember debating it in the House and at the time it was a reasonably substantial relief. The figures are £250 for a married couple at the standard rate of tax and £125 for a single person. For the amount of administration involved, I would ask the Deputy not to pursue this.
Given that there is a current budget surplus of £1 billion, just how big does that surplus have to get before the Department of Finance starts giving the Minister grief and talking about scarce resources?
We can be quite clear about that - it can never get big enough.
Another Corkman, Pearse Wyse, introduced the previous measure.
Amendment put and declared lost.
Sections 109 and 110 agreed to.
I move amendment No. 148:
In page 111, before section 111, to insert the following new section:
"III. The Freedom of Information Act, 1997, is hereby amended in the Third Schedule thereto by the addition to Part I at the end thereof-
(a) in column (1), of 'No. 39 of 1997',
(b) in column (2), of 'Taxes Consolidation Act, 1997', and
(c) in column (3), of 'Section 857'.".
This amendment proposes to insert new sections in the Finance Bill to amend the Freedom of Information Act, 1997. Under section 32 of that Act information will not be disclosed if such disclosure is prohibited by another enactment, unless that enactment is listed in the Third Schedule to the Act. Under section 857 of the Taxes Consolidation Act, 1997, certain Revenue personnel are obliged to make declarations of confidentiality undertaking not to disclose information in relation to the affairs of schedule D taxpayers. That section is not currently listed in the Third Schedule to the Freedom of Information Act, and its omission has been drawn attention to by the office of the Information Commissioner designate.
In order to avoid a situation whereby the omission of section 857 from the Third Schedule would prevent the disclosure of information which would otherwise fall to be disclosed under the Freedom of Information Act, the new section being inserted into the Finance Bill amends the Third Schedule of the Freedom of Information Act to insert into it a reference to section 857 of the Taxes Consolidation Act, 1997.
Amendment agreed to.
Section III, as amended, agreed to.
Section 112 agreed to.
NEW SECTIONS.
I move amendment No. 149:
In page 111, before section 113, to insert the following new section:
"113.-Section 7 of the Principal Act is hereby amended by the insertion in subsection (1) after 'cease' of 'continue to'.
The remaining amendments in my name were all tabled by Deputy Ferris in the course of the debate on the Taxes Consolidation Bill. I will formally move them, since that was the advice given to Deputy Ferris at the time.
I believe the Deputy intended to phrase this amendment such that the words "shall cease to apply" would become "shall continue to cease to apply" in section 71 of the Taxes Consolidation Act, 1997. Section 7 provides for the application of the Age of Majority Act, 1985 to tax law. The concern of the Deputy seems to be that section 24(b) of the Age of Majority Act, 1985 ceased to apply in 1986 when the underlying legislation was enacted. It cannot cease to apply again if it already no longer applies. Legislation is always current and should be read as current. Accordingly, the phrase "shall cease to apply", while having effect back in 1986 has equal effect in 1998. Therefore, I cannot accept the amendment. Even if we understood it we could not accept it.
Amendment, by leave, withdrawn.
I move amendment No. 150:
In page 111, before section 113, to insert the following new section:
"113.-Section 96 of the Principal Act is hereby amended by the deletion in subsection (3) of 'Where' and the substitution of 'Subject to section 645(3), where'.".
Amendment, by leave, withdrawn.
I move amendment No. 151:
In page 111, before section 113, to insert the following new section:
"113.-The Principal Act is hereby amended-
(a) in section 271 by the insertion in subsection (1) in the definition of 'industrial development agency' after 'Authority' of 'or Forfás'.
(b) in section 273 by the insertion in subsection (1) in the definition of 'industrial development agency' after 'Authority' of 'or Forfás',
(c) in section 283 by the insertion in subsection (1) in the definition of 'industrial development agency' after 'Authority' of 'or Forfás',
(d) in section 285 by the insertion in subsection (1) in the definition of 'industrial development agency' after 'Authority' of 'or Forfás', and
(e) in section 403 by the insertion in subsection (7) after 'Authority' of 'or Forfás'.".
Amendment, by leave, withdrawn.
I move amendment No. 152:
In page 111, before section 113, to insert the following new section:
"113.-The Principal Act is hereby amended-
(a) in section 487 by the deletion in subsection (1)(a)(i)(II) of 'state' and the substitution of 'territory',
(b) in section 826 by the deletion in subsection (4) of 'state' where it firstly and secondly occurs and the substitution of 'territory', and
(c) in section 828 by the deletion in subsection (2) of 'country' and the substitution of 'territory'.".
Amendment, by leave, withdrawn.
I move amendment No. 153:
In page 111, before section 113, to insert the following new section:
"113.-The Principal Act is hereby amended-
(a) in section 548 by the deletion in subsection (3)(a) of 'the United Kingdom' and the substitution of 'Great Britain and Northern Ireland',
(b) in section 832 by the deletion in subsection (1) in the definition of 'the Convention' of 'Government of the United Kingdom' and the substitution of 'British Government', and
(c) in section 832 by the deletion in subsection (4)(a) of 'the United Kingdom' and the substitution of 'Great Britain and Northern Ireland'.".
Amendment, by leave, withdrawn.
I move amendment No. 154:
In page 111, before section 113, to insert the following new section:
"113.-The Principal Act is hereby amended-
(a) in section 860 by the insertion in subsections (1) and (2) after 'oath' of 'or affirmation',
(b) in section 905 by the insertion in subsection (2)(f) after 'oath' of 'or affirmation',
(c) in section 938 by the insertion in subsection (2) after 'oath' where it firstly and secondly occurs of 'or affirmation',
(d) in section 939 by the insertion in subsections (1), (2) and (3)(b) after 'oath' of 'or affirmation',
(e) in section 939 by the insertion in subsections (2) and (3)(b) after 'sworn' of 'or affirmed',
(f) in section 1066 by the insertion after 'oath' of 'or affirmation',
(g) in section 1066 by the insertion after 'swears' of 'or affirms', and
(h) by the insertion of the following section after section 1104 of that Act:
1104A.-The Oaths Act, 1888, and also every Act for the time being in force authorising an oath to be taken in any particular manner shall apply to the oaths required by this Act to be taken.'.".
This amendment involves a substantive point in so far as it seeks to insert the word "affirmation" where the Act refers to oaths.
The purpose of these amendments is to remove ambiguity and inconsistencies in the Taxes Consolidation Act by making express provision for the affirmation which, in the case of conscientious objection to taking an oath, is a legal alternative to an oath. Where the Interpretation Act, 1937, already makes express provision for the term "oath" to include affirmation, and also for the term "swear" to include affirm in every Act of the Oireachtas, the provisions of the Interpretation Act, 1937, imply in the case of persons for the time being allowed by law to affirm instead of swearing.
As regards the Oaths Act, 1888, during the Report Stage of the Taxes Consolidations Bill, 1997, Deputy Ferris brought to my attention the fact that the provision which allows a person to affirm instead swearing is the Oaths Act of 1888 and that the permission given in that Act only applies for the purposes of legal proceedings. The result is that the provisions of the tax code which do not involve legal proceedings, but which provide for the swearing of an oath, are not covered by the Oaths Act, 1888. Accordingly, in such cases it is not permissible to affirm or declare and a person must swear. While there is an issue there, my officials are still considering the full implications of superimposing the Oaths Act on to the Taxes Consolidation Act. There is also the question of other taxing statutes, for example, VAT, excises and capital taxes. While these issues may not be considered in time for Report Stage, I can assure the Deputy that the matter is receiving attention. At this time, therefore, I am opposing the amendment, but I hope to have the matter resolved at least by next year's Finance Bill.
I accept the Minister's assurances in that regard.
Amendment, by leave, withdrawn.
I move amendment No. 155:
In page 111, before section 113, to insert the following new section:
"113.-The Principal Act is hereby amended-
(a) in section 867 by the insertion after 'make' of 'by regulations',
(b) in section 905 by the insertion in subsection (2)(c) after 'as' of 'affecting section 645(3) or'.".
Amendment, by leave, withdrawn.
Section 113 agreed to.
Amendments Nos. 156 to 164, inclusive, not moved.
Schedule 1 agreed to.
SCHEDULE 2.
I move amendment No. 165:
In page 115, line 4, to delete "Principal Act".
This is a technical drafting amendment. At the beginning of the text of Schedule 2 the words "Taxes Consolidation Act, 1997" and "Principal Act" both appear. Principal Act was left in during printing in error.
Amendment agreed to.
Second Schedule, as amended, agreed to.
Schedules 3 to 9, inclusive, agreed to.
I may put down amendments on Report Stage, or, if necessary, recommit amendments in respect of four items: I may propose a technical amendment to amendment No. 78 concerned with relief for double taxation for repatriated profits; a technical amendment relating to the rules for leasing of assets; a technical amendment relating to section 11, which was not discussed here; and I am also looking at some changes to the new seafarer's allowance which I may propose on Report Stage. My officials are still looking at these issues and, while I am obliged to mention them at this stage, I cannot be more definitive.
I may wish to revisit the issue of the enterprise zones and the documents authority provisions on Report Stage.
I do not know what the Minister has in mind in respect of the seafarer's allowance but a case has been represented to me in respect of those who service the oil rigs.
That is one of the matters I am considering.
I would be obliged if the Minister would look at the matter because I understand the problem associated with the seafarers generally is also associated with that issue. I know that employers and unions are anxious that the Minister look at it in terms of what might be possible.
That is one of the matters we will look at in that area.
We may wish to move amendments on Report Stage in respect of the enterprise zones and Dublin docklands.
I thank all Deputies for their contributions and co-operation on this debate. I know from experience that Committee Stage of the Finance Bill is an onerous task, especially for Opposition Deputies. The same expertise is not available to them as it is to me. I also thank all Deputies for their deliberations. Since becoming a Member of this House I have regarded the Finance Bill as a great learning experience and one to be enjoyed. However, over the years it has become much more technical and it is a major undertaking today, especially when one is in Opposition. We tried to produce the more substantial amendments late last week, however, difficulties arose when some Deputies received them and others did not.
I also thank my officials and officials in the Revenue Commissioners for their work in this area. It is a major undertaking and many hours were spent on it. Deputies will note that, despite my objections, I have become politically correct. I thank all involved, including you, Chairman.
I also thank you, Sir, for your forbearance and temper. I thank the Minister and his officials for their assistance and advice. The earlier part of the debate yesterday morning was most unsatisfactory in so far as we only dealt with a tiny number of the amendments scheduled. A number of the sections were not even considered. This is something we will have to look at in future years.
I thank you, Sir, for your forbearance. I also thank the Minister. He always conducts his business seriously but with a sense of humour, something which is too often left out of politics nowadays.
I am not supposed to be humorous, according to some major newspapers.
I do not think the Minister will change; I hope not. I also wish to be associated with the Minister's comments on his officials and on the officials in the Revenue Commissioners. I was Minister of State at the Department of Finance and I am aware of the work undertaken to meet these very demanding days which were set at time when Finance Bills were much simpler.
Deputy McDowell's points were made in a constructive manner. Given the pressure on the Minister and his officials and the ludicrous amount of time provided to the Opposition to deal with the issues involved, much of which is very important, a small extension of the dates allocated to the Bill would probably produce better law.
I wish to be associated with those sentiments. It is evidence of the blind spot people have that the thrust of the comment is on the personal income tax side. However, subsequent business is arguably more important to personal income taxpayers.
Given the misallocation of resources between Government and Opposition, we find it difficult to cope with the legislation in its entirety, especially in the fashion it was structured on this occasion. Having said that, I thank you for your forbearance and the Minister for his courtesy. It was not a contentious Bill.
Ignoring the advice from wild Bill Hickock, I have sat with my back to journalists. I have not seen any journalists since the procedure commenced. That raises profound questions about the committee structure. I find it difficult to understand the argument that the annual Finance Bill, or at least major sections of it, is not worth pursuing by persons who purport to comment on it later. It raises questions for politicians. If we are to have an elaborate committee structure for the number of Members in Dáil Éireann, as compared to approximately 650 Members in the neighbouring Parliament, it imposes an impossible strain on servicing it.
Members of the media must be brought into the equation. Some who do not attend Dáil Éireann will write articles about the House not sitting during St. Patrick's week and about Minister travelling around the world when in most cases they are on national business. In view of this, we are entitled to comment that the media should get its house in order in terms of covering the affairs of Dáil Éireann.
Title agreed to.
